This blog post was authored by Heather DeBlanc.
On August 30, 2013, the Internal Revenue Service released final regulations regarding the Affordable Care Act’s (“ACA”) requirement that all individuals maintain minimum essential coverage or pay a penalty, called the “Individual Mandate.” Starting October 1, 2013, individuals will be able to purchase health coverage through California’s exchange called Covered California. An individual will need to provide information to Covered California about the type of plan his/her employer offers. Beginning in 2015, a large employer may be penalized if it fails to offer affordable minimum essential coverage to substantially all employees. The new guidance describes minimum essential coverage and provides additional direction as to what types of plan constitutes an “eligible employer-sponsored plan.”
What is “minimum essential coverage”? Minimum essential coverage includes (but is not limited to) the following types of coverage:
- Eligible employer-sponsored plan;
- Retiree coverage under a group health plan;
- Particular government-sponsored programs offered by the Department of Defense;
- Qualifying plans in the individual market;
- Recognized foreign health plan sponsors;
- Exchange plans established by U.S. territories.
Most employer plans will meet the definition of “minimum essential coverage” by providing an “eligible-employer sponsored plan.”
What is an “eligible employer-sponsored plan”? Under the final regulations, an eligible employer-sponsored plan includes group health insurance coverage offered by, or on behalf of, an employer to the employee that is:
- A governmental plan;
- Any other plan or coverage offered in the small or large group market within a state;
- A grandfathered health plan offered in a group market;
- A self-insured group health plan.
What about collectively bargained or professional organization plans? The final regulations clarify that collectively bargained plans or plans offer by a professional employer organization or leasing company on behalf of an employer qualify as an eligible employer-sponsored plan.
Can an employer give its employees money to purchase coverage in the exchange? The final regulations leave open the question of whether an arrangement in which an employer provides funds for employees to use to obtain coverage in the exchange qualifies as an eligible employer-sponsored plan. We expect the IRS will issue further guidance.
Where can employers obtain more information? The final regulations are available at http://www.gpo.gov/fdsys/pkg/FR-2013-08-30/pdf/2013-21157.pdf.