Yes, there’s a connection.  An employer’s 2015 offer of “minimum essential coverage” (MEC) to at least 70% of its full-time employees and their dependents avoids the employer mandate tax imposed by 26 U.S.C. § 4980H(a).  If that coverage is “affordable,” if it provides “minimum value,” and if all full-time employees are included in the offer, the employer also avoids the employer mandate tax imposed by § 4980H(b), while also making the employees ineligible for premium subsidies, whether or not they accept the employer’s offer.

But, as we’ve explained in prior posts, MEC can be very minimal, excluding hospitalization, for example.  And, if other coverages are enriched sufficiently, a no-hospitalization MEC plan can satisfy (by .3%, in our experience) the 60% value test of the government’s online MV Calculator.  So, a penny-wise employer might avoid employer mandate taxes by automatically enrolling all full-time employees in that sort of plan.  Some have.  Fears of contagion partly explain this year’s failed Senate effort to repeal the ACA’s dormant automatic enrollment mandate.

As you might expect, HHS and IRS are not amused.  On November 4, 2014 (election day), they published Notice 2014-69, warning of forthcoming amended HHS regulations (45 CFR § 156.145), saying:

  • “[U]nder the [new] regulations, an employer will not be permitted to use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value.”
  • “An employer that has entered into a binding written commitment to adopt, or has begun enrolling employees in [such a plan] prior to November 4, 2014 based on the employer’s reliance on the results of use of the MV Calculator” gets a one-time pass “if that plan year begins no later than March 1, 2015.”
  • No-hospitalization minimum value plans that don’t get that pass will become subject to the new rules when they are published, with no grace period.

Even if the employer gets a pass, employees offered the minimum value plan will remain subsidy eligible, and their employer must communicate that to them.  Here’s how Notice 2014-69 described that obligation.

An employer that offers a Non-Hospital/Non-Physician Services Plan (including a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) to an employee (1) must not state or imply in any disclosure that the offer of coverage under the Non-Hospital/Non-Physician Services Plan precludes an employee from obtaining a premium tax credit, if otherwise eligible, and (2) must timely correct any prior disclosures that stated or implied that the offer of the Non-Hospital/Non-Physician Services Plan would preclude an otherwise tax-credit-eligible employee from obtaining a premium tax credit. Without such a corrective disclosure, a statement (for example, in a summary of benefits and coverage) that a Non-Hospital/Non-Physician Services Plan provides minimum value will be considered to imply that the offer of such a plan precludes employees from obtaining a premium tax credit. However, an employer that also offers an employee another plan that is not a Non-Hospital/Non/-Physician Services Plan and that is affordable and provides MV is permitted to advise the employee that the offer of this other plan will or may preclude the employee from obtaining a premium tax credit.

Bottom line:  if you haven’t enrolled employees in your 2015 minimum value plan, you have seven weeks to devise and implement another ACA compliance option.  Employer be nimble, employer be quick.