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IRS Proposed Rule Outlines Coverage Requirements for Employers

By Rebecca Adams, CQ HealthBeat Associate Editor

May 1, 2013 -- The Internal Revenue Service (IRS) is expected to publish a proposed rule on Friday that provides more information about the type of health coverage employers must offer in order to comply with the health care law.

The proposed rule, which the agency released before formally publishing it in the Federal Register, builds on previous regulations. It spells out several designs of health insurance plans that employers can use as a model to make sure that the coverage they are offering is sufficient to meet the requirements under the overhaul. The health care law (PL 111-148, PL 111-152) says that employers can be penalized if they don't offer insurance that covers at least 60 percent of costs and if one of their workers gets tax-subsidized coverage in the new exchanges.

The rule lays out several types of insurance plan designs that federal officials will consider "safe harbors" so that employers will know that the insurance they carry complies with the law if it mirrors those plans.

The safe harbor examples include a plan with a $3,500 combined medical and drug deductible and a $6,000 cap on workers' out-of-pocket costs. Plans would cover 80 percent of costs.

Another allowable plan would require workers to pay up to a $4,500 combined medical and drug deductible, with plans picking up 70 percent of costs. The limit on employees' out-of-pocket costs would be $6,400 and employers would make a $500 contribution to a health savings account.

A third safe harbor would require workers to pay a $3,500 medical deductible and plans would pay 60 percent of costs on medical expenses. Instead of paying a deductible for prescription drugs, workers would pay 25 percent of the costs for drugs through drug co-pays of $10 to $50 for three different tiers of drugs, and 75 percent co-insurance for specialty drugs.

The IRS requested comments on these plan designs that they proposed designating as safe harbors.

The agency also has released a calculator to help employers figure out whether their insurance covers enough costs to meet the law's requirements.

If an employer wants to use a plan design that has unusual features and the value of the plan cannot be determined with the calculator, then the company should hire an actuary to do an analysis.

The agency will collect public comments for 60 days.

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