IRS Ruling and Caprock MEC Plans

As many of you may be aware, yesterday there was an IRS ruling on Minimum Value Plans (MVPs). This ruling centered around whether or not Minimum Essential Coverage Plans (MECs) with no inpatient hospitalization benefit could qualify as an MVP plan. This ruling may be causing some confusion as to the viability of the Caprock HealthPlan MEC and MEC Plus products. This ruling has no effect, zero, on the plans Caprock has sold and marketed. The MEC and MEC Plus products continue to provide a legal and viable alternative for employers and employees seeking to mitigate the Employer and Individual Mandates.

The MVP MEC Plans that some companies, brokers, and stop loss carriers have been marketing were advertised to be Minimum Essential Coverage (MEC) Plans that also met the requirements of a Minimum Value Plan (MVP). Caprock Health Plans advised our clients that we did NOT believe this was the case and that we anticipated governmental intervention would eventually occur. This is exactly what has occurred.

MEC Plans by definition must, at a minimum, offer Preventative Care at 100% coverage in a self-funded plan. MEC Plans do protect the employer from the $2,000 per employee ACA tax and also protects the employee from the individual tax imposed by ACA via the Individual Mandate. MEC plans do not protect the employer from the $3,000 ACA tax for any full-time, eligible employee who procures coverage from an exchange AND obtains a subsidy to do so.

MVP Plans are plans that meet the definition of minimum value as defined by ACA. This definition, as defined by ACA, for an MVP plan is a plan that pays at least 60% of the actuarial value, comprised of plan benefits plus cost sharing, of a basic, general full coverage health plan. Under § 36B(c)(2)(C)(ii), a plan fails to provide minimum value if “the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” If the coverage offered by the employer fails to provide minimum value, an employee may be eligible to receive a premium tax credit. Health Plans that meet Minimum Value AND Affordability satisfy both the $2,000 and $3,000 employer tax along with the taxes associated with the Individual Mandate.

The problem that arose and provided the impetus for the proposal of MVP MEC Plans and subsequent confusion in the marketplace was a glitch in the Minimum Value Calculator provided by HHS for the purpose of determining Minimum Value. It was possible to enter benefits into the calculator provided by HHS that did not cover ANY inpatient hospital services and still meet the 60% threshold of MV as determined by the calculator. Therefore, many brokers and insurance companies began marketing MEC Plans that they also touted to meet Minimum Value, thus satisfying both employer ACA taxes, the $2,000 and $3,000.

Caprock works very hard to bring you cutting edge solutions and to that end we are constantly in consultation with ACA experts and attorneys. We had determined that there was enough governmental chatter about not allowing the MVP Calculator “glitch” to stand that we chose not to market any MEC plan as an MVP plan. We do continue to market MEC Plans that are allowed by ACA law, not a glitch, and will remain viable unless there is a change to the law. We will continue to monitor all aspects of the law and solutions in this difficult but opportunistic time to provide you the most cost effective solutions and best service in the market place.

This communication is designed to provide a summary of significant developments to our clients. Information presented is based on known provisions. Additional facts and information or future developments may affect the subjects addressed. It is intended to be informational and does not constitute legal advice regarding any specific situation. Plan sponsors should consult and rely on their attorneys for legal advice.