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MEC Plan Requirements to Avoid 4980H(a) Penalty


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Does offering a group health plan that only offers preventive services allow an ALE to avoid the 4980H(a) penalty?

The only definition of minimum essential coverage I can find is on the CMS website and states that a MEC plan includes "employer-sponsored coverage."   Providers of preventive care only MEC plans argue that such plans satisfy an ALE's requirement to offer coverage and avoid the 4980H(a) penalty. I see how you could get to this conclusion based on the statute, but it doesn't seem consistent with the intent of the ACA employer mandate. 

Is there any guidance from the IRS or other agency on this? What are your thoughts?

TIA! 

 

 

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Yes, it does. It's the #1 selling point of MEC plans. And no, it's not consistent with the employer mandate but it's also something the DOL has to ignore otherwise every fast food chain and retail establishment in the country would go out of business.

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For a relevant meaning about what is minimum essential coverage, see Internal Revenue Code (26 U.S.C.):

§ 4980H http://uscode.house.gov/view.xhtml?req=(title:26%20section:4980H%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section4980H)&f=treesort&edition=prelim&num=0&jumpTo=true

§5000A(f) http://uscode.house.gov/view.xhtml?req=(title:26%20section:5000A%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section5000A)&f=treesort&edition=prelim&num=0&jumpTo=true

and rules:

26 C.F.R. § 54.4980H-1(a)(27) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-1#p-54.4980H-1(a)(27).

The regulator for the § 4980H excise tax on an applicable large employer that does not offer minimum essential coverage is the Treasury department and its Internal Revenue Service.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Yes, these so-called skinny plans have been around since ACA enactment and do avoid the (a) penalty but provide virtually no benefits beyond an annual wellness visit (preventive care). Typical "premiums" under $100/month/FT employee with possibility of "rebates" to the employer if minimal usage of benefits,

The rub is the exposure to the (b) penalty for all the FT employees that visit HealthCare.gov for subsidized coverage so might be a viable option for an employer with a large number of FT employees on Medicaid or Medicare or covered by spouses so (b) penalty exposure is minimal.

Please avoid the scam/scheme of the employer auto-enrolling all FT employees and paying 100% of the premiums for the skinny plan that precludes subsidized Obamamcare coverage and therefore also purportedly avoids the (b) penalty, a little too cute in my book.

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You can't avoid the (b) penalty with a MEC skinny plan because it's not minimum value.  So the Form 1095-C will show that minimum value coverage was not offered regardless if the employer pays all or most of the cost and the (b) will be assessed for any FT employee with Marketplace premium tax credits.

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The scheme to have the skinny plan avoid BOTH the (a) and (b) penalties is to auto-enroll all FT employees in the skinny plan with employer paying 100% of the premiums (under $100/month with premium rebates possible).

Since the employees are "covered" by and employer plan that provides MEC they are ineligible for Obamacare subsidies and therefore cannot invoke an employer (b) penalty.

To obtain subsidies the EE must affirmatively opt out of the ER provided MEC skinny coverage and of course the EEs don't always understand the opt out option and voila no (b) penalties either.

Like I said, a little too "cute" a scheme for me.

 

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  • 2 weeks later...

Here is the health reform employer mandate - per my many years as a Health Reform compliance consultant:

To avoid the “penalty tax,” an employer of 50 or more Full Time Equivalents must offer 95+% of its employees and their dependents access to “affordable,” “minimum essential coverage” of “minimum value” or pay a penalty tax. How are those defined in 2023?

Access/Coverage: Employee and dependents, an employer need not offer coverage to a spouse.

Affordable: An employer can charge an after-tax contribution of 9.12% of a worker’s income (need not make the employee contribution to the health plan eligible for pre-tax contributions via the cafeteria plan), plus, where a spouse or child is covered, the employer can add the full cost to employees who want to cover those individuals.

Minimum Essential Coverage: Certain preventive services with a U.S. Preventive Services Task Force (USPSTF) grade of A or B (with no cost sharing). And, where routine care expenses would otherwise qualify for coverage, those same expenses must be provided for individuals enrolled in a clinical trial.

Minimum Value: A plan that covers 60% of expenses. For example, in 2023, minimum value includes a plan that has a deductible and out of pocket maximum set at $9,100 (a calculated actuarial value of 59+%, which qualifies because it is within 2% of the 60% standard). See: https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/av-calculator-final.xlsm

So, my experience is that you can simply offer workers and their children up to age 26 a 100% associate-pay-all (contributions) self-insured MEC to avoid (a) penalty taxes, and the above self-insured (or if you can find one, insured) ugly, ugly affordable, minimum essential coverage of minimum value option to avoid (b) penalty taxes. You don't care if they enroll in (a), and no one will enroll in (b) - because your communications will repeat, over and over and over, that there are better coverage and lower cost options in the public marketplace - especially because the "family glitch" has been eliminated (at least for the time being). 

 

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