Monday, November 17, 2014

MVP Struggling - Part 1

Minimum Value (aka MVP) Plans have been touted for groups over 100 (this year, and 50 next year) wishing to meet the letter of the ObamaTax law and yet minimize their costs. The Government published an online calculator where employers could enter their plan benefits and determine whether it met the minimum value test themselves, and avoid the cost of hiring an actuary. As we blogged a few months ago, the calculator included a "glitch" which allowed employers to exclude in-hospital services (and some other high cost benefits) and still pass the 60% threshold, and therefore some of the penalties taxes.

That's now changed. The IRS and HHS have now warned plans that they will fix the calculator, and the definition:

"[C]ertain group health plan benefit designs that do not provide coverage for in-patient hospitalization services are being promoted to employers. A plan that fails to provide substantial coverage for these services would fail to offer fundamental benefits ... plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services ... do not provide the minimum value intended by the minimum value requirement."

Shorter: no, MVP's with no hospital coverage don't make the cut. Interestingly, so-called "skinny" plans with hospital and other Minimum Essential Coverage are still okay.

[ed: I'll refrain here from opining as to whether or not it's really the place of unelected, unaccountable bureauweenies to make these determinations]

So, what to do? A whole cottage industry has sprung up touting these plans as an affordable alternative to full-blown (and expensive) group plans, and at some point in the (presumably near) future, new rules will be put in place to cut them off. What then?

One option, of course, would be to just stop offering group coverage altogether, and just pay the tax penalty fine (which is likely to be a LOT less than any premiums). Another would be to offer a slightly "less skinny" plan that does cover in-hospital charges in a way that satisfies Our Betters in DC©.

The folks at OptiMed Health claim that their plan offers "independent actuarial certification and statement of compliance." Which is nice, and perhaps a viable alternative for employers who want to avoid both the penalty and bankruptcy.

My co-blogger Nate Ogden has another, intriguing, thought: why not offer a good plan, with around a 55% Actuarial Value, that covers the majority of people’s healthcare expenses. It would exclude hospital inpatient, therapy, and prolonged treatment. But it would cover, at a low cost, the majority of people’s needs for the year. This way most healthy people can get on a low cost plan and the employer won’t pay any penalties for them. Sick people in a group would still be subsidy eligible, so they could buy a more comprehensive plan on the Exchange, and their net cost is reduced by a subsidy. This appeases the government officials who concern with MVP minus hospital was they precluded individuals that needed coverage from getting a subsidy

The purpose is to satisfy the "80/20 Conundrum:" insure the 80% of the group that only accounts for 20% of the cost, then pay the $3,000 penalty on the 20% of the group that accounts for 80% of the costs.

Of course, you'd want to work closely with your agent and/or TPA to make sure all the i's are crossed and the t's dotted.

In part 2, we'll hear from a Benefits Attorney with another take on this development.
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