MEC + Skinny MVP = No Tax Credit?

[yorkriver1]

Pretty sure that's right. The Marketplace letter they gave the employee has the box checked that they believe they are both MEC and MVP.

IRS site says if plan is not MVP the employee can get tax credit.

Marketplace site says has to be both unaffordable and not MVP to get tax credit. I assume Marketplace beats IRS for enrollment in plan with tax credit. Most folks are told straight up at work, this client is ESL, couldn't make sense of the plan. Essentially a large company of service workers who simply wants to avoid the employer penalties.

I spent a lot of time reviewing these things today, somehow have managed to avoid anyone who had this gray area until now.

 

[Ann H]

It's a pretty complicated situation. If the employee is ELIGIBLE for employer-sponsored insurance (but not enrolled in it), then either the unaffordable rule or the "not MV" rule apply. If the employee ENROLLS IN it, then both rules must apply before you get a tax credit.

You said, "IRS site says if plan is not MVP the employee can get tax credit." The IRS site most likely said, "eligible for", and did not say "enrolled in".

Awful, huh?

The law also says that if the employee disenrolls, then both facts are relevant again. The employee may have difficulty disenrolling, depending on the plan's rules or whether Section 125 was used for pre-tax premium.

Following is a quote from the IRS/Treasury Dept.'s TD-9590

Individuals enrolled in coverage
Section 36B(c)(2)(C)(iii) and the proposed regulations provide that an individual who enrolls in an eligible employer-sponsored plan is not eligible for the premium tax credit even if the plan is unaffordable or fails to offer minimum value. Commentators asked whether an individual who enrolls in an eligible employer-sponsored plan and then terminates coverage during the plan year is treated as eligible for minimum essential coverage under the plan for the entire plan year under this rule, even though the coverage is unaffordable or does not provide minimum value. Commentators similarly asked if individuals who enroll in continuation coverage and then disenroll from it later during the year are treated as eligible for minimum essential coverage for the entire year. In response to these comments, the final regulations clarify that an individual is treated as eligible for minimum essential coverage under an eligible employer-sponsored plan by reason of enrolling in the plan or in continuation coverage only for months the individual is enrolled in the coverage.

Commentators expressed concern that an employee may be enrolled automatically in employer-sponsored coverage and would be treated as eligible for minimum essential coverage under an employer-sponsored plan by reason of the automatic enrollment even though the plan is not affordable or does not provide minimum value. The commentators were specifically concerned about the automatic enrollment provision in section 18A of the Fair Labor Standards Act (added by section 1511 of the Affordable Care Act), which is applicable to employers with more than 200 full-time employees. (The Department of Labor, which has jurisdiction over the automatic enrollment provisions under section 18A of the Fair Labor Standards Act, does not intend to require employers to comply with the automatic enrollment provisions until after it publishes regulations and those regulations become applicable, and has indicated that the regulations will not take effect by 2014. See Notice 2012-17, Q&A-1.)

Commentators also raised concerns about the automatic enrollment of an employee in an employer-sponsored plan for other reasons, which could include automatic enrollment that a plan might provide for without regard to the automatic enrollment requirements of the Affordable Care Act, automatic enrollment that might occur because of administrative error, or automatic re-enrollment in the plan in a subsequent year. The commentators recommended allowing an employee to opt out of the employer-sponsored coverage following automatic enrollment.

In response to these comments, the final regulations provide that an employee or related individual is treated as not enrolled in an eligible employer-sponsored plan for a month in a plan year or other period if the employee or related individual (1) is automatically enrolled in the plan for that plan year or other period, and (2) terminates the coverage before the later of the first day of the second full calendar month of the plan year or other period or the last day of any permissible opt-out period provided by the employer-sponsored plan or in regulations to be issued by the Department of Labor. Thus, an individual who is automatically enrolled for a plan year or other period in coverage that is unaffordable or that does not provide minimum value and who terminates that coverage by the date specified in the preceding sentence will not be treated as eligible for minimum essential coverage under the employer-sponsored plan for the months in which the individual was automatically enrolled in the plan that are within that plan year or period. Accordingly, the individual will not be precluded by the automatic enrollment from inclusion in the taxpayer's coverage family for computing the amount of the premium tax credit for those months.​

https://www.irs.gov/irb/2012-24_IRB/ar05.html

Since the time of that IRS TD9590, there have been rules about how skinny are too skinny, but other than that I do not believe that the rules have changed. The problem is that he ENROLLED IN it, then applied for a subsidy.

 

[yorkriver1]

I would like to know if it's futile to apply on the Marketplace for a tax credit, with these facts.
The prospect employee has not enrolled or been enrolled in any of the insurance at work. Why the notice from the employer's Marketplace notice letter says they consider both plans to be compliant, one as MEC and the other as MVP, I don't know, when the SBC says the plan doesn't meet MVP.

It's only skinny MVP and skinny MEC on offer, + dental.

Employee hours worked classes are 1. part time (no benefits offered, I think), full time by 30 hours average/sort of--the ones who get offered the skinny plans--my client seems to be in this category, --, and also 3. full time with regular corporate style benefits offered--what we usually think of as group major medical.

The benefits rep reached at corporate, from the # on the letter they give employees gave me the categories, and encourages the employee to call them to see which over 30 hours category EE is in. Rep can't say about the company's intention about whether EE's are intended to not qualify for tax credits, or may be. My guess is they are simply working to avoid employer penalties.

 

[Ann H]

Most likely the Marketplace received that information from the employer or the insurance plan(s). The marketplace/IRS might have written to the employer for verification of eligibility/enrollment. Or they may already have information that the large employer or the insurer put on 1095's that were filed last year.

I would say that your client should work with his accountant about getting his subsidies for last year. If the IRS balks, they could provide documentation.

As for this year, it might be harder. Yes, you could appeal, but how long will that take? Does the client have enough money to pay full price until the appeal goes through, or else until tax-filing time next year?

 

[yorkriver1]

Once again, this forum is not just gold, but platinum. Thanks so much!

The Marketplace plan info letter with the box checked stating they believe plans are compliant that came from ER with MEC/MVP plan materials was printed on the back of the mandatory Marketplace notice that ER's are supposed to give EE's. So, my guess is that their benefits consultant/broker helped them with compliance work.

Interesting situation. Job one is for the employee to get very good information from the benefits dept about current and future eligibility for possible full on group major medical, which they do offer after a period of time on job 30+ hours, which EE is doing. In my talk with HR yesterday, they suggested EE call them.

No insurance last year, so, penalty. This year, we still have time for 2/1/17 coverage while sorting out their future options. Obv, no chance of tax credit if she will be eligible for their "regular" group plan this year.

Then, deciding if they want to do an appeal if it seems on point. I wonder about any (illegal, but all too common anyway) actions to get rid of EE as a problem from ER if an employee challenges their insurance plan design scheme. Maybe that's caffeinated anxiety. The employee puts their small child in the same daycare that is the ER, and seems tied to them for that connection.

 

[TN_agent]

It is pretty crappy of these places to do this. I had one like this this year, a temp agency. The plan is a "MEC". With 63 preventive benefits only. They say it does meet the MEC to avoid the tax penalty (they don't spell out if it is their tax penalty or the person's) . The other one offered are crappy indemnity. Like would pay $1000 for hospitalization. Total, not per day. They said if you took out both then you wouldn't have the tax penalty. But they were very careful to remain silent on whether or not the person could get a premium subsidy and would not offer any guidance. I don't know how they could consider that minimum value. But, what if the person gets a 1095 saying they were offered affordable coverage? I asked the person, what would happen if you got appendicitis and were in the hospital for 4 days, would this plan pay 60% of the $20,000 bill? The answer is no of course.

This person is a native American, so it is a complete double whammy. I felt okay saying that she was not offered a qualified health plan, it was limited benefits. Do you think I advised her incorrectly?

Now I am second guessing myself. She is absolutely screwed if she can't get the subsidy or the Native American deductible/copay assistance.

 

[Ann H]

Yes, those plans are skinny to the point of being anorexic. However, there are reasons that employers are doing it, and it is not all bad ethics. Some employers simply will not have profit margin to pay for insurance or the penalty. Their profit margin cuts too close to the bone. Their employees are lower-paid employees and they are labor intensive. Think of dry cleaners, landscapers, restaurants, hotels, etc. Or else they have far too many employees, because "labor" is actually their product, and paying for insurance for every single employee would bankrupt them. Think of temp agencies, for instance.

It is the law itself that put those people in a bind. They may not be buying skinny MEC because the want to be Scrooge.

Personally, I walk away from those cases, even if the employer legitimately must do something desperate like that. I couldn't sleep at night if I knew we installed a terrible anorexic plan to poor employees, who won't get a subsidy now, and who probably don't even realize what happened to them. The business owner may not be able to get out of this trap, but I, as an insurance agent, can walk away.

 

[TN_agent]

I would not assist a company to set these kinds of plans up.

What my client is offered is this.



I probed to see if there are other plans available. They told her not until she had worked 2000 hours with them (she just started). That suggests there is a major medical available to some people, but not my client. There is nothing on there that suggests to me it that any of these would meet minimum value, even if they are considered MEC. Don't they have to meet both tests? Am I wrong here?

I am going to ask her to take the employer form to them just to be sure, but what if they straight up lie and say that it meets both? Is anyone actually checking on these companies??

Even if my client has to pay back the subsidy, what mechanism is there to pay back the assistance she would receive with copays as a member of a tribe?