The IRS and Treasury have published a new Notice of Proposed Rulemaking and Notice of Hearing providing additional clarifications on the Individual Mandate and Minimum Essential Coverage requirements under the Patient Protection and Affordable Care Act (PPACA). This NPRM provides a number of clarifications and limited exemptions from the individual mandate in 2014 for individuals enrolled in coverage for the medically needy, families receiving benefits as part of an expansion population under Section 1115(a)(2) of the Social Security Act, and individuals enrolled only in Space Available or Line-of-Duty Care under TRICARE. Individuals enrolled in these types of care will not be penalized in months during 2014 because it was not clear during the 2014 open enrollment period whether or not these benefits would be considered Minimum Essential Coverage. Minimum Essential Coverage is the type of coverage that must be maintained for individuals to avoid the individual mandate penalties.
The IRS and Treasury have also provided several other clarifications. The Agencies have confirmed that Minimum Essential Coverage excludes any coverage that consists solely of excepted benefits, such as most health FSAs, stand-alone dental or vision plans, and certain fixed indemnity plans. The Agencies have also solicited comments on how to treat employer contributions provided through Section 125 Cafeteria Plans that employees may not elect to receive as a taxable benefit for affordability purposes. The comments and resolution to this issue will be important for those employers providing flex credits through Section 125 Cafeteria Plans that employees are not allowed to cash out. The NPRM also confirms that the only wellness incentives that are presumed to be earned for affordability purposes are those related to tobacco. All other incentives earned through a wellness program, whether for participation or for meeting another health standard such as BMI, are disregarded in determining affordability.
Finally, the Agencies clarified that individual mandate penalties are assessed on a monthly basis. The penalty for each month will be 1/12 of a flat dollar amount ($95 in 2014) or a percentage (1% of household income in 2014). A public hearing will be held on May 21, 2014. For a copy of these proposed regulations, click here.
