Healthcare plans with no in-patient hospitalization coverage don’t meet requirements

Posted By on Nov 30, 2014 | 0 comments


In Notice 2014–69, the IRS advised taxpayers and businesses that employer-sponsored health care plans that do not provide in-patient hospitalization services or physician services do not provide minimum value.

What does that mean?

It appears that certain group health plans that do not provide coverage for in-patient hospitalization services are being promoted to employers.

A plan that fails to provide substantial coverage for these services would fail to offer fundamental benefits that are nearly universally covered, and historically have been considered integral to coverage, under typical employer-sponsored group health plans.

As you might imagine, promoters of these plans contend that the plans satisfy minimum value within the meaning of the Affordable Care Act (including section 36B(c)(2)(C)(ii)of the Internal Revenue Code (Code) and final HHS regulations under section1302(d)(2)(C) of the Affordable Care Act.

Excluding such coverage could affect the composition of those covered by discouraging enrollment by employees who have significant health issues. It is believed that plans failing to provide substantial coverage for in-patient hospitalization services or for physician services do not provide the minimum value required by the Affordable Care Act.

What’s the implication to employees as taxpayers?

According to the IRS, employees will not be required to to treat a Non-Hospital/Non-Physician Services Plan as providing MV for purposes of an employee’s eligibility for a premium tax credit.

The IRS has proposed changes to the regulations regarding healthcare plans and minimum value considerations for the tax credit. It appears that November 4, 2014 is a cutoff date for when those regulations would apply to healthcare plans. Final decision on the proposed changes is expected to occur sometime in 2015, and would apply to plans that start enrolling employees or whose new plan year begins on or after November 4, 2014.

Additional information for employers regarding the Affordable Care Act is available at www.healthcare.gov and www.irs.gov/ACA.