The proposed rule describes the types of coverage that does not satisfy MEC and provides additional information on the calculation of, and exemption from, individual shared responsibility payments under the ACA.
The IRS offers additional detail on MEC and shared responsibility payments consistent with recent guidance and the final MEC rule published in August 2013. However, this proposed rule officially adds to the list of exempt individuals from the mandate under the ACA and leaves the door open for Secretarial discretion to identify further hardship waivers granted on a tax return, rather than through the exchange.
Comments for the proposed rule are due April 28, and will be discussed at a public hearing on May 2.
To view the IRS’ proposed rule, click here.
Select highlights from the proposed rule:
- Types of Coverage Excluded from MEC: In addition to other types of coverage noted in previous guidance, the proposed rule clarifies four types of limited coverage that do not meet MEC standards: Medicaid coverage for the medically needy, Medicaid Section 1115 Demonstration Projects that do not provide comprehensive coverage, limited TRICARE coverage, and excepted benefits (ex: dental and vision insurance). Concurrent guidance from the IRS clarifies that people enrolled in Medicaid coverage for the medically needy, certain Medicaid Section 1115 projects, and limited TRICARE coverage are exempt from the mandate in 2014 since the year is already underway and this rule is still in proposed form.
- Health Reimbursement Accounts (HRAs): The rule proposes that new employer contributions made to HRAs integrated with an employer-sponsored plan will be considered in determining whether employer coverage meets the affordability test for the purposes of the individual mandate, if such contributions can be used to pay premiums. Amounts in an HRA that can be used only for cost-sharing are not taken into account when determining affordability because they do not impact the employee’s premium cost.
- Wellness Programs: The rule proposes that for purposes of determining coverage affordability, wellness incentives that reduce premiums are considered “earned” by employees only if they relate to tobacco use. Other wellness programs will be considered “unearned” for the purposes of the affordability test.
- Hardship Exemptions: The rule reiterates that HHS may publish guidance describing a hardship exemption that can be claimed on a federal income tax return, where individuals will not need to obtain a hardship waiver from the exchange.
- Shared Responsibility Payments: For people not eligible for Employer Sponsored Insurance, insurance affordability is calculated based on the lowest cost bronze plan premium (reduced by advanced premium tax credits) available in the individual market through the exchange serving the rating area in which the applicable taxpayer resides. If the exchange does not offer a single bronze plan that would cover all members of the taxpayer’s nonexempt family, the applicable premium is the sum of the premiums for the lowest cost bronze plans available in the exchange that provide coverage for all members of the family.