New ACA Regulations Address Minimum Essential Coverage and Exemptions

by Anne W. Hance and Amy M. Gordon

The U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) released on January 30, 2013, two proposed rules and a final rule relating to the Affordable Care Act’s (ACA) requirement that individuals maintain “minimum essential coverage” (MEC) or be subject to a “shared responsibility” payment.

  • IRS Final Rule: The IRS issued final regulations in May 2012 addressing eligibility for the health insurance premium tax credit, which is available to certain low-income individuals purchasing a qualified health plan on a health insurance exchange.  The January 30, 2013 final rule supplements these regulations by finalizing the requirement that “affordability” of coverage available for the employee under an employer-sponsored group health plan is determined based on self-only coverage (and not family coverage).
  • IRS Proposed Rule: The proposed rule addresses (1) the obligation each taxpayer has to make a “shared responsibility payment” for himself, herself and any dependents who, for a calendar month, do not have MEC, and (2) exemptions to this payment obligation.  The limited exceptions for this payment obligation include individuals who lack access to affordable MEC.  The proposed rule addresses the difference in determining affordable MEC for an employee eligible for coverage under a group health plan (as described above) versus affordability for a “related individual.”  A “related individual” is one for whom an Internal Revenue Code Section 151 deduction can be claimed.
  • HHS Proposed Rule: The HHS proposed rule sets forth standards and processes by which a health insurance exchange will make eligibility determinations and grant exemptions from the shared responsibility payment.  This proposed rule also (1) identifies certain types of coverage deemed to be MEC , and (2) sets forth standards by which HHS may designate certain health benefits coverage as MEC. 

    For example, self-funded student health insurance coverage and Medicare Advantage Plans are proposed to be designated as MEC.  Additionally, sponsors of other types of coverage that meet designated criteria, such as providing consumer protections required by the Affordable Care Act, may apply to HHS for recognition as MEC.

Next Steps

Health insurance issuers will want to consider whether the various products they offer or administer will meet the MEC requirements set forth in HHS’s proposed rule, in order to respond to inquiries from customers, to meet notice requirements (including inserting model statements into existing plan documents, as applicable), and potentially to respond to exchanges making eligibility determinations.  If a product does not constitute MEC, issuers may want to consider whether to continue to offer the product in its current form or revise the coverage to meet the MEC requirements.

Sponsors of group health plans will need to consider the separate affordability standards for employees and for related individuals and the implications for group health plan participants, and either modify coverage to meet the MEC standards, or consider the consequences of the shared responsibility payment.