Companies will no longer be able to provide their employees with group health insurance plans that do not cover inpatient hospitalization.

This news came in a recent notice published by the Internal Revenue Service.

Recently, many large employers with lower-wage workers were purchasing low-cost health insurance that does not cover hospitalization.  The IRS, however, has ruled that such plans do not meet the Affordable Care Act’s minimum value threshold.  Companies were only able to purchase such plans because they are not required meet the reform law’s essential health benefits package requirement, which applies only to plans offered to individuals on health insurance exchanges.

iStock_000014445371XSmallThe no-hospitalization policies were likely to leave many lower-income workers without the coverage they needed – and with large medical bills.  They also were likely to leave hospitals with unexpected uncompensated care.  This could have proven especially challenging for private  safety-net hospitals because they serve larger numbers of lower-income workers than the typical hospital.

The administration is permitting employers that committed to such plans by November 4 to use them for one year and is offering affected workers access to premium subsidies that some of those workers did not otherwise have if they choose to purchase insurance on an exchange instead.

The IRS will issue regulations formalizing this policy next year.

To learn more about this issue and its implications for large businesses, low-wage workers, and hospitals, see this Kaiser Health News report.  Go here to see the IRS notice.