[Federal Register Volume 80, Number 169 (Tuesday, September 1, 2015)]
[Proposed Rules]
[Pages 52678-52680]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21427]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-143800-14]
RIN 1545-BM85


Minimum Value of Eligible Employer-Sponsored Health Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Supplemental notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document withdraws, in part, a notice of proposed 
rulemaking published on May 3, 2013, relating to the health insurance 
premium tax credit enacted by the Affordable Care Act (including 
guidance on determining whether health coverage under an eligible 
employer-sponsored plan provides minimum value) and replaces the 
withdrawn portion with new proposed regulations providing guidance on 
determining whether health coverage under an eligible employer-
sponsored plan provides minimum value. The proposed regulations affect 
participants in eligible employer-sponsored health plans and employers 
that sponsor these plans.

DATES: Written (including electronic) comments and requests for a 
public hearing must be received by November 2, 2015.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-143800-14), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
143800-14), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at www.regulations.gov (IRS REG-143800-14).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Andrew S. Braden, (202) 317-4725; concerning the submission of comments 
and/or requests for a public hearing, Oluwafunmilayo Taylor, (202) 317-
5179 (not toll-free calls).

SUPPLEMENTARY INFORMATION:

Background

    This document withdraws, in part, a notice of proposed rulemaking 
(REG-125398-12), which was published in the Federal Register on May 3, 
2013 (78 FR 25909) and replaces the portion withdrawn with new proposed 
regulations. The 2013 proposed regulations added Sec.  1.36B-6 of the 
Income Tax Regulations, providing rules for determining the minimum 
value of eligible employer-sponsored plans for purposes of the premium 
tax credit under section 36B of the Internal Revenue Code (Code). 
Notice 2014-69 (2014-48 IRB 903) advised taxpayers that the Department 
of Health and Human Service (HHS) and the Treasury Department and the 
IRS intended to propose regulations providing that plans that fail to 
provide substantial coverage for inpatient hospitalization or physician 
services do not provide minimum value. Accordingly, the proposed 
regulations under Sec.  1.36B-6(a) and (g) are withdrawn.
    Beginning in 2014, under the Patient Protection and Affordable Care 
Act, Public Law 111-148 (124 Stat. 119 (2010)), and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 
1029 (2010)) (collectively, the Affordable Care Act), eligible 
individuals who enroll in, or whose family member enrolls in, coverage 
under a qualified health plan through an Affordable Insurance Exchange 
(Exchange), also known as a Health Insurance Marketplace, may receive a 
premium tax credit under section 36B of the Code.

Premium Tax Credit

    Section 36B allows a refundable premium tax credit, which 
subsidizes the cost of health insurance coverage enrolled in through an 
Exchange. A taxpayer may claim the premium tax credit on the taxpayer's 
tax return only if the taxpayer or a member of the taxpayer's tax 
family (the persons for whom the taxpayer claims a personal exemption 
deduction on the taxpayer's tax return, generally the taxpayer, spouse, 
and dependents) has a coverage month. An individual has a coverage 
month only if the individual enrolls in a qualified health plan through 
an Exchange, is not eligible for minimum essential coverage other than 
coverage in the individual market, and premiums for the qualified 
health plan are paid. Section 36B(b) and (c)(2)(B). Minimum essential 
coverage includes coverage under an eligible employer-sponsored plan. 
See section 5000A(f)(1)(B). However, for purposes of the premium tax 
credit, an individual is not eligible for coverage under an eligible 
employer-sponsored plan unless the coverage is affordable and provides 
minimum value or unless the individual enrolls in the plan. Section 
36B(c)(2)(C). Final regulations under section 36B (TD 9590) were 
published on May 23, 2012 (77 FR 30377).

[[Page 52679]]

Employer Shared Responsibility Provision

    Section 4980H(b) imposes an assessable payment on applicable large 
employers (as defined in section 4980H(c)(2)) that offer minimum 
essential coverage under an eligible employer-sponsored plan that is 
not affordable or does not provide minimum value for one or more full-
time employees who receive a premium tax credit subsidy. Final 
regulations under section 4980H (TD 9655) were published on February 
12, 2014 (79 FR 8544).

Minimum Value

    Under section 36B(c)(2)(C)(ii), an eligible employer-sponsored plan 
provides minimum value only if the plan's share of the total allowed 
costs of benefits provided under the plan is at least 60 percent. 
Section 1302(d)(2)(C) of the Affordable Care Act provides that, in 
determining the percentage of the total allowed costs of benefits 
provided under a group health plan, the regulations promulgated by HHS 
under section 1302(d)(2), dealing with actuarial value, apply.
    HHS published final regulations under section 1302(d)(2) on 
February 25, 2013 (78 FR 12834). HHS regulations at 45 CFR 156.20, 
which apply to the actuarial value of plans required to provide 
coverage of all essential health benefits, define the percentage of the 
total allowed costs of benefits provided under a group health plan as 
(1) the anticipated covered medical spending for essential health 
benefits coverage (as defined in 45 CFR 156.110(a)) paid by a health 
plan for a standard population, computed in accordance with the plan's 
cost-sharing, divided by (2) the total anticipated allowed charges for 
essential health benefit coverage provided to a standard population.
    Under section 1302(b) of the Affordable Care Act, only individual 
market and insured small group market health plans are required to 
cover the essential health benefits. Minimum value, however, applies to 
all eligible employer-sponsored plans, including self-insured plans and 
insured plans in the large group market. Accordingly, HHS regulations 
at 45 CFR 156.145(b)(2) and (c) apply the actuarial value definition in 
the context of minimum value by (1) defining the standard population as 
the population covered by typical self-insured group health plans, and 
(2) taking into account the benefits a plan provides that are included 
in any one benchmark plan a state uses to specify the benefits included 
in essential health benefits.
    Notice 2014-69, advising taxpayers of the intent to propose 
regulations providing that plans that fail to provide substantial 
coverage for inpatient hospitalization or physician services do not 
provide minimum value, was released on November 4, 2014. Notice 2014-69 
also advised that it was anticipated that, for purposes of section 
4980H liability, the final regulations would not apply to certain plans 
(as described later in this preamble) before the end of a plan year 
beginning no later than March 1, 2015. However, an offer of coverage 
under these plans to an employee does not preclude the employee from 
obtaining a premium tax credit, if otherwise eligible.
    As announced by Notice 2014-69, HHS published proposed regulations 
on November 26, 2014 (79 FR 70674, 70757), and final regulations on 
February 27, 2015 (80 FR 10872), amending 45 CFR 156.145(a). The HHS 
regulations provide that an eligible employer-sponsored plan provides 
minimum value only if, in addition to covering at least 60 percent of 
the total allowed costs of benefits provided under the plan, the plan 
benefits include substantial coverage of inpatient hospitalization and 
physician services. Consistent with Notice 2014-69, the HHS regulations 
indicate that the changes to the minimum value regulations do not apply 
before the end of the plan year beginning no later than March 1, 2015 
to a plan that fails to provide substantial coverage for inpatient 
hospitalization services or for physician services (or both), provided 
that the employer had entered into a binding written commitment to 
adopt, or had begun enrolling employees in, the plan before November 4, 
2014. For this purpose, the plan year is the plan year in effect under 
the terms of the plan on November 3, 2014. Also for this purpose, a 
binding written commitment exists when an employer is contractually 
required to pay for an arrangement, and a plan begins enrolling 
employees when it begins accepting employee elections to participate in 
the plan. See 80 FR 10828.

Explanation of Provisions

    The preamble to the HHS regulations acknowledges that self-insured 
and large group market group health plans are not required to cover the 
essential health benefits, but notes that a health plan that does not 
provide substantial coverage for inpatient hospitalization and 
physician services does not meet a universally accepted minimum 
standard of value expected from and inherent in any arrangement that 
can reasonably be called a health plan and that is intended to provide 
the primary health coverage for employees. The preamble concludes that 
it is evident in the structure of and policy underlying the Affordable 
Care Act that the minimum value standard may be interpreted to require 
that employer-sponsored plans cover critical benefits. See 80 FR 10827-
10828.
    As the preamble notes, allowing plans that fail to provide 
substantial coverage of inpatient hospital or physician services to be 
treated as providing minimum value would adversely affect employees 
(particularly those with significant health risks) who may find this 
coverage insufficient, by denying them access to a premium tax credit 
for individual coverage purchased through an Exchange, while at the 
same time avoiding the employer shared responsibility payment under 
section 4980H. Plans that omit critical benefits used 
disproportionately by individuals in poor health would likely enroll 
far fewer of these individuals, effectively driving down employer costs 
at the expense of those who, because of their individual health status, 
are discouraged from enrolling. See 80 FR 10827-10829.
    Accordingly, these proposed regulations incorporate the substance 
of the rule in the HHS regulations. They provide that an eligible 
employer-sponsored plan provides minimum value only if the plan's share 
of the total allowed costs of benefits provided to an employee is at 
least 60 percent and the plan provides substantial coverage of 
inpatient hospital and physician services. Comments are requested on 
rules for determining whether a plan provides ``substantial coverage'' 
of inpatient hospital and physician services.

Effective/Applicability Date and Transition Relief

    These regulations are proposed to apply for plan years beginning 
after November 3, 2014. However, for purposes of section 4980H(b), the 
changes to the minimum value regulations (in Sec.  1.36B-6(a)(2) of 
these proposed regulations) do not apply before the end of the plan 
year beginning no later than March 1, 2015 to a plan that fails to 
provide substantial coverage for in-patient hospitalization services or 
for physician services (or both), provided that the employer had 
entered into a binding written commitment to adopt the noncompliant 
plan terms, or had begun enrolling employees in the plan with 
noncompliant plan terms, before November 4, 2014. For this purpose, the 
plan year is the plan year in effect under the terms of the plan on 
November 3,

[[Page 52680]]

2014. Also for this purpose, a binding written commitment exists when 
an employer is contractually required to pay for an arrangement, and a 
plan begins enrolling employees when it begins accepting employee 
elections to participate in the plan. The relief provided in this 
section does not apply to an applicable large employer that would have 
been liable for a payment under section 4980H without regard to Sec.  
1.36B-6(a)(2) of these proposed regulations.
    An offer of coverage under an eligible employer-sponsored plan that 
does not comply with Sec.  1.36B-6(a)(2) of these proposed regulations 
does not preclude an employee from obtaining a premium tax credit under 
section 36B, if otherwise eligible.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It has been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these regulations and, because the regulations do not impose a 
collection of information on small entities, the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of 
the Code, this notice of proposed rulemaking has been submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
The Treasury Department and the IRS request comments on all aspects of 
the proposed rules. All comments will be available at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person who timely submits written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the hearing will be published in the Federal Register.

Drafting Information

    The principal author of these regulations is Andrew Braden of the 
Office of the Associate Chief Counsel (Income Tax and Accounting). 
However, other personnel from the Treasury Department and the IRS 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments

    Accordingly, 26 CFR part 1 as proposed to be amended on May 3, 2013 
(78 FR 25909), is proposed to be further amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read as 
follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2. Section 1.36B-6, as proposed to be added May 3, 2013 (78 FR 
25909), is amended by revising paragraphs (a) and (g) to read as 
follows:


Sec.  1.36B-6  Minimum value.

    (a) In general. An eligible employer-sponsored plan provides 
minimum value (MV) only if--
    (1) The plan's share of the total allowed costs of benefits 
provided to an employee (the MV percentage) is at least 60 percent; and
    (2) The plan provides substantial coverage of inpatient hospital 
services and physician services.
* * * * *
    (g) Effective/applicability date--(1) In general. Except as 
provided in paragraph (g)(2) of this section, this section applies for 
taxable years ending after December 31, 2013.
    (2) Exception. Paragraph (a)(2) of this section applies for plan 
years beginning after November 3, 2014.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-21427 Filed 8-31-15; 8:45 am]
 BILLING CODE 4830-01-P