IRS Helps Make New Procedures Easy

The IRS announces it will implement ways to give employers several methods, including introducing a new safe harbor, to demonstrate that their health care plans meet the “minimum value” to enrollees.

The new health care reform law requires plans to have a minimum worth in order to avoid financial penalties. To meet the minimum value test, a plan should 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 stated Thursday it will create a number of design-based safe harbors in the form of checklists to offer “a single straightforward way” for employers to establish whether or not their coverage satisfies the minimum value allowance “without the need to perform any calculations” or use an actuary.

In addition, the IRS stated it will manufacture a “minimum value calculator” in which employers would enter all of their info regarding plan benefits, coverage of services and cost sharing to decide if the plan provides minimum value.

Lastly, the IRS declared that plans with “nonstandard features”, which would not apply to the use of a minimum-value calculator without adjustments, that an employer could ask for “appropriate certification” from an actuary proving that the plan supplies minimum value consistent with acknowledged actuarial code and other conditions the IRS would provide in future guidance.

The help from the IRS has been well-received.

Benefit experts are partial to the decisions, particularly the safe harbors supplied 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 that the majority of group health care plans for companies have an actuarial worth of at least 80%.