As we continue talking about the Patient Protection and Affordable Care act, we thought we’d occasionally answer a few questions that our clients have been asking. One of the most frequently asked questions is about the Minimum Value Standards and the Obamacare Essential Health Benefits and how they relate to large and small employers. Today, we'll attempt to shed some light on this subject.
The plans of both large and small employers who provide coverage to their employees are required to meet Minimum Value Standards or Essential Health Benefits respectively. Since we serve both very small clients (1-10 employees) and large size clients (500+ employees), it’s important to make the distinction between the two.
- Large employers will want to ensure their minimum “affordable” plan option meets the Minimum Value Standard requirement or be subject to the penalties as if not offering coverage at all.
- For small groups, it is unlikely any major medical plans will be available, in our out of the Public Marketplaces, not containing Essential Health Benefits, the absence of which means employees would still be required to obtain other coverage to avoid the individual mandate penalties.
How the Minimum Value Standard is defined may have a tremendous impact on the affordability and administration for large group health plans. Currently, it is anticipated most active large employers’ health care plans will meet or exceed this 60% Actuarial Value threshold without modifications. However, as the currently proposed regulations are finalized, it will be incumbent upon employers to figure out whether their group health plan meets the Minimum Value Standard, of which the 60% Actuarial Value requirement is only a part, and what steps will be necessary to demonstrate compliance.
By statutory language within the Act itself, minimum value is understood to be a 60 percent Actuarial Value test. This is generally accepted to mean a plan would pay for at least an average of 60% of medical expenses incurred, based on a standard population, for allowable charges. However, the U.S. Department of the Treasury is authorized and is expected to issue specific regulations further defining the Minimum Value Standard. Proposed regulations exist, but they have yet to be finalized. The proposed regulations include a requirement that HHS have a “calculator” available on their website enabling employers to “test” their plan(s).
The requirement to cover the essential health benefits (EHB) package applies to products sold in the individual and small group markets, both inside and outside public marketplaces. The Act defines the “small group market” as each state currently defines the “small group market”, typically 2-50 employees or 2 -100 employees. Thus, some employers that are defined as “large” under the Employer Mandate may be considered “small” for public marketplace purposes. However, beginning in 2016, a small employer is defined as an employer with 100 or fewer employees, for all states. The result of this will be those employers defined as “large” for Employer Mandate purposes will be considered “small” for purposes of purchasing group health insurance and will therefore have less control over their benefit design.
While there cannot be annual or lifetime limits for large employers on any Essential Health Benefit, large employers are not required to specifically offer the 10 Essential Health Benefits; however, the Minimum Value Standard will be determined by a comparison to the standard population as related to other large employer health plans claims data set of a specific geographic region.
The administration has stated that the value of large employer health plans is primarily driven by spending on the provision of four core categories of benefits:
- Hospitalization and emergency room services
- Physician and midlevel practitioner care
- Pharmacy benefits
- Laboratory and imaging services
On the other hand, based upon current proposed regulations, small group plans must contain benefits in the following 10 Essential Health Benefit categories:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive services and wellness services and chronic disease management
- Pediatric services, including oral and vision care
There have been many comments on the proposed regulations regarding both Minimum Value Standards and Essential Health Benefits. The primary concern relates to the adverse impact these requirements will have on premiums for both individuals and groups as a result of increasing the values and/or benefits relative to an employer’s current plan designs.
Merit Resources, regardless of the final regulations, will ensure all clients participating under Merit’s master group contract health insurance plans will have peace of mind knowing Merit is responsible for ensure compliance with these requirements.