By JoAnn Volk and Sandy Ahn

Open enrollment in the Health Insurance Marketplaces overlaps this year with many employer plan open enrollment periods, which has prompted some employees to ask questions about how their offer of employer coverage may affect their eligibility for premium tax credits for a marketplace plan. As part of a project funded by the Robert Wood Johnson Foundation, CHIR faculty and a colleague at Georgetown’s Center for Children and Families help Navigators answer some of their more complicated consumer questions, including questions about employer-based coverage.

Recently, one consumer asked how a plan that didn’t include coverage for hospitalization could meet the Affordable Care Act’s minimum essential coverage (MEC) standard. Yet the plan materials said it was, and employees who enrolled in the plan couldn’t get premium tax credits in the marketplace. How is this possible?

In fact, it is possible, but it’s also only part of the story. Here’s why. There are two different measures of employer-sponsored coverage that consumers need to know. One is MEC, which is the type of coverage that you need to satisfy the individual mandate and avoid paying the penalty for not having health insurance. Most coverage meets this test, including employer-sponsored coverage that only covers preventive care and not hospital care.

The other measure of employer-sponsored coverage is minimum value (MV), which is one part of the two-part test to determine whether having access to an employer plan makes an individual ineligible for premium tax credits. To be adequate, or meet MV, an employer plan must cover, on average, 60% of the total cost of medical services for an enrollee. To meet the ACA’s affordability test, the premium for self-only employer-based coverage must be less than 9.56% of household income for 2015. If an employer plan fails either test, employees may be eligible for a marketplace plan with premium tax credits.

What does all this mean for consumers like the one who posed the above question? It means that even limited benefit employer plans can meet MEC, and individuals who enroll in those plans cannot qualify for premium tax credits. However, if they don’t enroll in the plan, and the plan fails either the affordability or minimum value test, they may be eligible for premium tax credits.

But wait, there’s more: a new twist on the test for minimum value. Turns out that because of a flaw in the government calculator for determining MV, some employer plans that didn’t include coverage for hospitalization or physician visits may have been able to demonstrate an actuarial value of 60%. In response, recent federal guidance clarifies that employer health plans that fail to provide “substantial coverage” for in-patient hospitalization, physician services, or both, do not provide minimum value – regardless of what the government’s calculator may say. At the same time, however, the guidance grandfathers in some skimpy plans because some employers had already signed contracts for the 2015 plan year. Thus, employers offering these plans won’t risk being hit with employer responsibility penalties for failing to offer coverage that meets the MV test. For employees stuck with these skimpy employer-sponsored plans for next year, the guidance offers some relief: they won’t be barred from receiving premium tax credits.

Keeping this straight can be confusing for consumers, but there are some tools available to help employees know how their employer plan rates on the two-part test. The Summary of Benefits and Coverage (SBC) must include statements on whether the plan meets MEC and whether it meets MV. The SBC must be provided to employees when they are enrolling in coverage and upon request.

But how can a consumer know whether the plan is affordable? The marketplace coverage application includes an Employer Coverage Tool, which individuals can give to their employer to get information on plan costs.  But some assisters have reported that individuals may not always feel free to ask their employer for details on the plan, especially in the low wage jobs where plans of questionable value may be offered. Large employers that fail to offer affordable coverage that meets minimum value are liable for the employer responsibility penalty for each employee that obtains marketplace coverage with premium tax credits. Employers may fear that providing that information can expose them to a fine.

The ACA includes whistleblower protections that protect employees from retaliation from employers for reporting potential employer violations of ACA requirements, such as not providing a SBC or discouraging an employee from applying for premium tax credits. But these protections may not be widely known. Or, even if employees know about them, they still may not feel fully protected in some workplaces.

We here at CHIR will be watching to see if this latest round of questions is the start of a trend – the real world application of skimpy plans that media reports have flagged may be coming. And of course we’ll continue to share here on CHIRblog and in our online Navigator Resource Guide the questions we hear from consumers as part of our Navigator technical assistance project.