On September 1, 2015, the Internal Revenue Service (IRS) issued proposed regulations that update the rules governing when health coverage under an employer-sponsored health plan provides minimum value (MV) for purposes of the Affordable Care Act (ACA). Under the proposed regulations (which withdraw and replace earlier proposed regulations, in part), an employer plan provides MV only if:

As background, certain employees who enroll in coverage under a qualified health plan through an ACA health exchange may receive a premium tax credit under the Internal Revenue Code (Code) to subsidize the exchange coverage (26 U.S.C. § 36B). However, an employee who is offered coverage under an employer-sponsored health plan consisting of affordable MV coverage may not receive a premium tax credit. Also, an employer that is subject to the ACA's employer mandate may be liable for penalties, under Code Section 4980H(b), if:

(Regarding employer mandate penalties, see Employer Mandate Toolkit and Practice Note, Employer Mandate under the ACA: Overview: Two Types of Employer Mandate Penalties.)

In IRS Notice 2014-69 (November 2014), the IRS anticipated that it would issue these proposed regulations addressing MV. Notice 2014-69:

The IRS proposed regulations on MV are consistent with Department of Health and Human Services (HHS) regulations that were finalized earlier this year (80 Fed. Reg. 10750, 10872). In guidance accompanying the HHS final regulations, HHS took the view that a health plan that excludes substantial coverage for inpatient hospital and physician services:

Reflecting an open question, the preamble to the IRS proposed regulations requests comments on how to determine if a plan provides "substantial coverage" of inpatient hospital and physician services.

The IRS proposed regulations generally would apply for plan years beginning after November 3, 2014 (reflecting the issuance date of Notice 2014-69). For employer mandate purposes, however, the proposed regulations do not apply to certain plans before the end of plan years that began on or before March 1, 2015. Specifically, the delayed effective date would govern plans that fail to provide substantial coverage for in-patient hospitalization services or physician services (or both) because the plan had:

According to the IRS, providing substantial coverage for inpatient hospitalization and physician services reflects a "universally accepted" MV standard that is inherent in health plans intended to provide employees primary health coverage. However, some commenters have questioned the basis for the IRS's and HHS's position regarding inpatient hospital and physician services, and implied that the Departments are imposing additional benefits requirements that are not warranted under the ACA. For now, the IRS and HHS appear united in their view that health plans must cover these services, including for purposes of avoiding the Section 4980H(b) employer mandate penalties (see Practice Note, Employer Mandate under the ACA: Overview: Two Types of Employer Mandate Penalties).