Employers concerned about the risk that their company could face additional payment assessments under the Affordable Care Act beginning in 2014 for failing to provide group health coverage of enough value to meet the mandates of the Affordable Care Act should seize a just announced opportunity to share your concerns with the Internal Revenue Service (IRS) by June 11, 2012.

In Notice 2012-31, the IRS invites employers, health plans, health insurers and other interested persons to provide feedback on several possible approaches to determining whether health coverage under an eligible employer-sponsored plan provides  the minimum value required by the Affordable Care Act to insulate an employer from potential liability to pay assessments under Internal Revenue Code (Code) § 4980H triggered when its employees qualify for tax credits under Internal Revenue Code (Code) § 39 as a result of the employer’s failure to provide minimum coverage.

Beginning in 2014, eligible individuals who buy coverage under a qualified health plan through an Affordable Insurance Exchange may receive a premium tax credit under § 36B only if they are not eligible for other minimum essential coverage, including coverage under an employer-sponsored plan that is affordable and provides minimum value.  The Affordable Care Act provides that a group health plan fails to provide the required minimum value if the plan covers less than 60 percent of the total allowed costs of benefits provided under the plan.  If a full-time employee of a large employer receives a premium tax credit because the group health plan fails to meet the minimum value requirements, the employer may be liable for an assessable payment under § 4980H.

According to Notice 2012-31, the IRS anticipates that proposed regulations implementing these rules will allow an employer-sponsored plan to use one of several alternative approaches to ascertain that the plan provides minimum value. Specifically, Notice 2012-31 seeks comment on the following three potential approaches that could be used to decide whether an employer-sponsored plan provides minimum value.

According to Notice 2012-31, the IRS contemplates that for purposes of making the necessary calculations, the Departments of Treasury and Health & Human Services (HHS) jointly will make available to employer sponsored plans to offer three options for demonstrating satisfaction of the minimum value requirement by an employer sponsored plan.  The first two alternatives are intended to allow an employer-sponsored plan to calculate the minimum value of its plan by entering information about the plan’s benefits, coverage of services, and cost-sharing terms using one of two calculators:

• The actuarial value calculator (AV calculator),
• The minimum value calculator (MV calculator)

According to Notice 2012-31, the MV calculator would be designed for use by employer-sponsored self-insured plans and insured large group plans is expected to use claims data reflecting typical self-insured employer plans.  An array of design-based safe harbors in the form of checklists that would provide what the IRS characterizes as a “simple, straightforward way” to ascertain that employer-sponsored plans provide minimum value without the need to perform any calculations or secure an actuarial calculation from a qualified actuary.

For plans with nonstandard features that preclude the use of the AV calculator or the MV calculator without adjustments, the IRS anticipates that the proposed guidance will allow a group health plan to obtain an appropriate certification by a certified actuary of the minimum value for the group health plan calculated in accordance with prescribed continuance tables, recognized actuarial standards, and other conditions contained in administrative guidance.

Notice 2012-31 notes that the Affordable Care Act assigns the authority to issue certain of the rules for determining whether an employer-sponsored plan provides minimum value to HHS that will specify the methods for determining the actuarial value of a qualified health plan (QHP) offered through an Affordable Insurance Exchange and non- grandfathered plans in the individual and small group markets. On February 24, 2012, HHS issued the “Actuarial Value and Cost-Sharing Bulletin” (HHS actuarial value bulletin) available here that describes the assumptions and methodology that HHS anticipates will govern the calculation of actuarial value.  The IRS Notice describes how the IRS anticipates that guidance issued by HHS on the determination of actuarial value will be applied in determining minimum value and outlines ways in which the determination of minimum value is expected to differ from the determination of the actuarial value of QHPs in order to reflect differences between QHPs and employer-sponsored plans, such as differences in their levels of standardization and the populations covered.

The deadline for responding to the IRS’ request for comments on these proposals is June 11, 2012.  Employer-sponsored group health plans, their sponsors, fiduciaries, administrators, insurers and consultants who are concerned about the potential implications or workings of these proposals should act quickly to evaluate and share their input with the IRS in accordance with the instructions outlined in Notice 2012-31.

For Help or More Information

If you need help reviewing or responding to the Notice or other help reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care practices, documents, communications, or operations, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters. 

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals.  A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials concerning regulatory, investigatory or enforcement concerns. 

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations.   She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern Health Care and many other national and local publications.   You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

• EEOC Sues Wendy’s Franchisee For Disability Discrimination
• Brokerage Firm To Pay $630,000+ To Benefit Plans To Settle DOL Charges It Wrongfully Steered Clients To Investments
• Latest $100,000 HIPAA Resolution Agreement Nails Physician Group,
• DC Court Enjoins Implementation of NLRB Poster Rule
• Health Plans Should Act Quickly To Prepare Affordable Care Act Required Summary of Benefits & Communications & Update Other Health Plan Communications

• Health Plan BCBST To Pay $1.5 Million In 1st OCR Enforcement Action Prompted By HITECH Breach Report
• March 21 New Deadline To Comment On Proposal To Extend Minimum Wage, Overtime Rules To In Home Care Workers
• NLRB Report Shows Rise In Unfair Labor Practice Complaints & Formal Proceedings
• Sullivan University System to Pay $483,000 in Back Wages Overtime Violations Stemming From Worker Misclassifications
• New DOL Final Rules Tighten Requirements For Employers To Hire Alien Workers Using H-2B Visas
• OSHA $1Million Award Against AirTran Airways Highlights Retaliation Risks
• HHS Chides Trustmark Life Insurance Company For “Excessive” Health Premium Increases After Affordable Care Act Rate Audit
• Labor Department Final Rule Defines Recreation Vehicle For Longshore & Harbor Workers’ Compensation Act
• Portion of Health Care Costs Paid By Government Programs Rose As Employer Provided & Other Private Health Care Coverage Declined In 2010
• Manufacturer’s Excessive I-9 Documentation Triggers Discrimination Liability
• Stamer Dallas Bar Journal Article Cautions Employers Must Take Holistic Approach To Address Worker Misclassification Risks

For important information concerning this communication click here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TOU.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2012 Cynthia Marcotte Stamer, P.C.  All rights reserved.