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WASHINGTON—The Internal Revenue Service says it will develop rules to give employers several ways, including a new safe harbor, to prove that their health care plans provide “minimum value” to enrollees.
Under the health care reform law, plans must have a minimum value to escape financial penalties. To meet the minimum value test, a plan must cover 60% of the “total allowed costs of benefits provided under the plan,” according to the Patient Protection and Affordable Care Act.
In Revenue Procedure 2012- 31, the IRS said Thursday it will develop a variety of design-based safe harbors in the form of checklists to provide “a single straightforward way” for employers to determine if their plans meet the minimum value threshold “without the need to perform any calculations” or use an actuary.
In addition, the IRS said it will develop a “minimum value calculator” in which employers would enter information about plan benefits, coverage of services and cost sharing to determine if the plan provides minimum value,
Finally, the IRS said for plans with “nonstandard features” that would preclude the use of a minimum-value calculator without adjustments that an employer could seek “appropriate certification” from an actuary that the plan provides minimum value in accordance with recognized actuarial standards and other conditions the IRS would provide in future guidance.
Benefit experts welcomed the choices, especially the safe harbors provided by the IRS.
“The good news is that the IRS is providing alternatives to doing calculations,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.
“They are providing lot of flexibility,” said Frank McArdle, a senior director with Aon Hewitt in Washington.
The vast majority of employer plans should easily pass the 60% test, said Andy Anderson, a partner with Morgan, Lewis & Bockius L.L.P. in Chicago. Actuaries say the overwhelming majority of group health care plans have an actuarial value of at least 80%.