Why employers in retail, hospitality should consider minimum-value plans

Why employers in retail, hospitality should consider minimum-value plans

Every industry has been affected by the changes brought on by the Affordable Care Act, but hospitality and retail employers are dealing with arguably the biggest challenge when it comes to compliance. That’s because both rely largely on labor-intensive work. They’re volatile industries with heavy turnover. And many employees work varying hours from week to week.

Many retail and hospitality HR and benefits managers are confronted with rising costs and an increased administrative burden. And now, they must resolve program inefficiencies in order to respond to a host of benefits-related compliance issues and their associated government fines. Specifically, HR and benefits managers are now tasked with much closer coordination of the following:

  • Eligibility. Employee counts and whether they are part-time or full-time equivalent. · Enrollment. Adding part-time workers to the plan who work 30 hours or more, on average, per week. · Medical coverage. Finding appropriate and affordable coverage for all eligible employees. · Plan administration. Ensuring proper and timely documentation of enrolled employees and employees who waive coverage. · Compliance. Understanding requirements and filing paperwork in a timely fashion · Claims advocacy. Assisting plan members with claims.

A robust benefits software package can help employers manage eligibility and enrollment, handle employee notifications and provide data needed for compliance tasks. However, an HR professional or other business leader will likely need to assume responsibility for the other benefits-related issues so they don’t adversely affect your business’s bottom line more than they have to.

Minimum-value plans

One solution to meet medical coverage requirements and keep administration, compliance and claims under control is a minimum-value plan. A minimum-value plan is one that pays at least 60% of the total allowed cost of benefits that are expected under the plan. These basic plans are easy to administer and more affordable than fully insured plans while still meeting requirements set by legislation directed by the ACA.


[Image credit: Bloomberg]

For example, a fully insured plan might cost $300 per month for employee-only coverage, while a minimum-value plan may cost just $110 per month per employee while still providing ACA-mandated care and coverage for inpatient hospitalization.

Hospitality and retail businesses may have to work closely with a benefits consultant to understand whether the plan they’re offering employees reaches “minimum value” under the ACA. As mentioned, in order to meet this ACA standard, a minimum-value plan must pay at least 60% of the total allowed cost of benefits expected to be incurred under the plan. But this share is a moving target based on a number of factors. To clarify, the federal government has published regulations and guidance for determining minimum value, and has created a minimum value calculator. Additionally, recent regulations have clarified that in order to meet minimum value, plans must offer substantial coverage for both inpatient hospitalization and physician services.[1]

Finally, it should be noted that minimum value plans must still offer “minimum essential coverage,” and coverage that is considered “affordable” under the ACA. Offering a minimum-value plan, on its own, without considering these other two ACA coverage requirements, may still expose your organization to liability under the employer shared responsibility rules of the ACA (the rules commonly referred to as the employer mandate.)

What the future holds

While minimum-value plans are currently a solution that provides lighter, yet cost-effective and compliant coverage for hospitality and retail companies, further legislation, regulations and guidance under the ACA may change how these plans are administered in the future. Benefits consultants will be monitoring these developments closely.

Though minimum-value plans are a solution for industries struggling to find balance between meeting requirements to avoid penalties and continuing to keep costs low for themselves and employees, it will be interesting to see how these businesses grow in the coming years. Businesses with fewer than 50 full-time employees and full-time equivalents do not have to provide medical coverage that meets ACA coverage requirements under the employer mandate. Will they purposely avoid adding new employees to escape coverage mandates? Or will they continue to add new workers, pay for healthcare and find other ways to cut costs?

Only time will tell.