Employers who depended on an online government calculator for help may have to do some recalibration or face heavy penalties.

At issue: the so-called skinny health plans some employers offer as coverage to their employees. These plans offer just enough coverage, according to an online calculator created by the government, to qualify as compliant with the mandates of the Patient Protection and Affordable Care Art.

Or do they?

Folks over at the U.S. Department of Health and Human Services and the Treasury Department have apparently been looking into plans “approved” by the calculator and have decided some of them fall short of PPACA compliance. The agencies are mainly focused on plans that don’t cover in-patient hospitalization or clinician services.

The IRS issued an advisory this week warning employers that the federal agencies were about to release Notice 2014-69 which would redefine which plans meet the specs and which ones didn’t. In a public missive, the IRS said the upcoming notice “advises employers and other taxpayers that employer-sponsored health plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services do not provide minimum value” under PPACA.

Read: ‘Skinny plans’ gain traction among employers

The IRS specifically cited the online calculator for essentially giving false positive readings to some skinny plans.

“The notice also advises that IRS, Treasury, and HHS are considering whether the continuance tables underlying the Minimum Value Calculator produce valid actuarial results for plans with these designs.

Employers offering plans that fail to cover in-patient hospitalization or physician services should exercise caution in relying on the Minimum Value Calculator to demonstrate that these plans provide minimum value for any portion of a taxable year after publication of final regulations.”

Read: IRS increases 2015 FSA contribution limit

While companies that have already signed up for such plans won’t face penalties, any companies going forward that do will face penalties of up to $3,000 per employee per year, depending upon whether their employees are forced to go elsewhere for health insurance.

“Using the calculator, a plan could omit basic benefits but still be ACA-compliant as long as it has equivalent actuarial value to the lowest-level (‘bronze’) plans sold on exchanges,” wrote attorney Eric Fader of Day Pitney LLC. “The Departments believe that some of the results that can be produced by the calculator were not intended by the ACA regulations, and said they will propose amendments to the regulations to explicitly provide that plans that do not cover both physician services and inpatient hospital services do not provide minimum value.”

Fader noted that the federal agencies are basically closing up loopholes that have appeared in PPACA during its rollout.

“The guidance will be the basis of new regulations expected to be issued on or about March 1, 2015, that will apply to all plans that are adopted on or after November 4, 2014, or whose plan years begin after March 1, 2015,” he said. “The new regulations, which will be effective immediately upon adoption, will also prohibit employers that offer ‘skinny plans’ from stating or implying that their having offered the plan precludes their employees from receiving premium tax credits if they purchase coverage through an exchange.”

Fader said there would still be a role for skinny plans in the workplace.

“Although they will no longer be a solution for employers seeking to avoid the $3,000 ‘affordability’ penalty by making their employees ineligible for premium tax credits, offering a skinny plan should still allow an employer to avoid the separate penalty of $2,000 per year per full-time employee for failing to offer all full-time employees ‘minimum essential coverage,’” he said.

Instant Insights /

Feds to reexamine skinny plans for PPACA compliance

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