Starting in 2014, most individuals must maintain minimum essential health coverage or pay a penalty. (Please see our post here for a description of the health coverage mandates that apply to individuals and their families.) The Internal Revenue Service recently issued a proposed regulation clarifying the minimum essential coverage rules and other aspects of the individual mandate. Several points addressed in the proposed regulation will be of interest to employers that offer group health coverage to their employees.
Excepted Benefits Are Not Minimum Essential Coverage
Employers might wish to structure programs providing limited health benefits—such as dental and vision coverage or employee assistance—as “excepted benefits” so that these programs will avoid the group health plan requirements. Final regulations issued last year explained that minimum essential coverage does not include “health insurance coverage” consisting only of excepted benefits. The proposed regulation clarifies that no coverage (whether insured or self-insured) consisting solely of excepted benefits will qualify as minimum essential coverage.
This clarification confirms that coverage consisting solely of excepted benefits will not satisfy the employer’s obligation to offer minimum essential coverage to at least 95% of its full-time employees or the individual’s obligation to maintain minimum essential coverage. Employers must offer, and individuals must maintain, other group health coverage in order to satisfy these shared-responsibility mandates.
On the positive side, however, a lower-income employee who is covered by a plan that offers only excepted benefits will not be prevented from receiving premium tax credits. The tax credits help lower-income individuals purchase individual health coverage on an exchange. An employee who has minimum essential coverage from an employer health plan is not eligible for premium tax credits; but employer coverage consisting solely of excepted benefits will not affect the employee’s eligibility.
Continue Reading New Guidance Clarifies Minimum Essential Coverage Rules