Minimum Value Plan: Frequently Asked Questions
How Does the Minimum Value Plan Work for Prevailing Wage Workers?
A plan’s minimum value is related to the percent of the allowed costs of benefits provided by the plan. Basically, the minimum value defines what percentages the plan or employer pays versus the percentage prevailing wage workers pay.
Under the ACA, a plan must pay at least 60% of the covered benefits and services, so that participant cost-sharing would be limited to up to 40% only. This is the minimum value plan.
This standard is used to determine whether prevailing wage workers, who are eligible for employer-sponsored health care plans, can get subsidized coverage on an exchange. Employees are eligible for subsidized health plan services on an exchange if they are eligible for the health plan, but the plan provided does not offer minimum value of at least 60%.
Do you need to know if your group health plans are at least minimum value plans?
All employers, from small to large businesses, which offer group health plan services to employees should know if their offered fringe benefits are at least minimum value plans (MVPs).
Most employers need to give a notice of the existence of public exchanges. You also need to disclose on this notice whether or not the provided health plan services meet the minimum value standard.
Why should you care if your employees are eligible for subsidized coverage on an exchange?
Large employers have to pay an annual penalty tax of $3,000 for each prevailing wage worker who received subsidized coverage to buy individual insurance on exchange. Large employers are defined as those with at least 50 full-time equivalent employees. This is a large cost that could be avoided with the right planning.
You also need to know of the details regarding minimum value standards because they will decide the eligibility for subsidy of your part-time employees and other paid staff.
How do employees become eligible for subsidized coverage on exchange?
There are three requirements for an employee to qualify for subsidized coverage on an exchange. The employee:
- Must have a household income between 100% to 400% of the federal poverty level;
- Must not be eligible for government-sponsored health plan services;
- Must not be (a) eligible for employer-sponsored coverage, or (b) eligible only for employer-sponsored coverage that is defined as unaffordable or does not meet the minimum value standards
ARCHER JORDAN can help you make sure that your company offers the minimum value plan for health plan services to your employees. This will help you save costs in taxation and keep your employees well-protected.
With decades of experience as a third party administrator providing fringe benefits to government contractors and hourly hires, we can help you manage your fringe benefits. Contact ARCHER JORDAN today at +1 888-745-0754!