Minimum essential coverage is health insurance coverage that meets the shared responsibility provision of the Affordable Care Act (individual mandate). Although there is no longer a federal penalty for not having minimum essential coverage, the individual mandate still exists and the concept of minimum essential coverage remains important.
There are several types of qualifying events that only trigger special enrollment periods if the individual already had minimum essential coverage prior to the qualifying event. and some states have imposed their own individual mandates, with penalties for residents who fail to maintain minimum essential coverage.
what plans are considered minimum essential coverage?
plans do not have to be aca compliant to be considered minimum essential coverage, as there are pre-aca plans that still count as coverage under the law.
Plans that qualify as minimum essential coverage include employer-sponsored plans, individual major medical plans (including new aca-compliant plans, grandfathered plans, and grandfathered plans), tricare, medicare , most medicaid and chip plans, among others.
Which plans are not considered minimum essential coverage?
Policies that are not coverage for major medical expenses and that are not regulated by the ACA do not count as minimum essential coverage. this includes discount plans, limited benefit plans, critical illness plans, accident supplements, and dental/vision plans.
Indian health care coverage alone is also not considered minimum essential coverage, although Native Americans have access to year-round enrollment in the exchange (no cost-sharing if income does not exceed 300% of the poverty level). ), and were exempt from the penalty of the individual mandate of the aca during the years in which it was appraised.
Health care sharing ministries are also not considered minimum essential coverage, although their members were also eligible for an exemption from the aca’s individual mandated penalty.
but the concept of minimum essential coverage remains important for special enrollment period eligibility: if an individual experiences a qualifying event that would trigger a special enrollment period (sep) for aca-compliant coverage but only if the person already had minimum essential coverage, the sep would not be triggered if the person’s previous coverage was through a health care sharing ministry. the same goes for people whose previous coverage was a short-term plan, fixed indemnity plan, discount plan, etc.
However, there is an exception for people who have Medicaid for pregnancy, an unborn child with a chip, or Medicaid for medical needs. these are not considered minimum essential coverage, but do meet prior coverage requirements when a person enrolls in a health plan during a special enrollment period that requires prior minimum essential coverage. and termination of Medicaid coverage for pregnancy, chipped unborn child, and Medicaid coverage for medical necessity will trigger a special enrollment period of loss of coverage (for both mother and baby, in the case of coverage for the child by born with a chip).
minimum essential coverage versus minimum value
The terms minimum essential coverage and minimum value come from here and are sometimes combined. but they mean two different things. the minimum essential coverage, as described above, is the coverage that satisfies the individual mandate of aca.
minimum value, on the other hand, is a measure of whether a plan offered by a large employer provides adequate coverage. to provide minimum value, an employer-sponsored plan must
- cover at least 60 percent of the average medical costs in a standard population (ie, similar to a bronze plan in the individual and small group market), and
- provide “substantial coverage” for hospital care and medical treatment.
- One is for employers that simply don’t offer coverage to at least 95 percent of their full-time employees. in 2020, this penalty is calculated at $2,570 per full-time employee (minus the first 30 employees), and kicks in if even one full-time employee qualifies for a premium subsidy on the exchange (for 2021, hhs has proposed a fine of $2,700).
- The other is for employers who offer coverage, but it’s not affordable or doesn’t provide a minimum value. Unaffordable, in 2020, is defined as the portion of the employee’s premium (for individual coverage in the least expensive plan offered by the employer) that is more than 9.78 percent of the employee’s household income (this will increase to 9.83 percent in 2021). minimum value, as noted above, is defined as coverage of at least 60 percent of costs for a standard population and provides “substantial coverage” for medical and inpatient care. the penalty, in this case (in 2020), is the lesser of $3,860 per full-time employee receiving a subsidy in the exchange, or $2,570 per full-time employee, less the first 30 employees (for 2021, hhs has proposed adjusting these amount to $4,060 and $2,700, respectively).
Large group plans (in most states, “large group” means more than 51 employees) don’t have to cover ACA essential health benefits, and they don’t have to fall into one of the metal levels of the aca. instead, the minimum value provision is used as the basic requirement that large employer plans must meet or exceed.
A large employer’s plan should be affordable and provide minimal value. if not, and at least one employee gets subsidized coverage on the exchange instead of the employer’s plan, the employer will have to pay the aca employer-mandated penalty.
some employer-sponsored plans provide minimal essential coverage, but are actually scant plans
Large employers are subject to the ACA’s employer mandate, which requires them to offer coverage to their full-time employees. the sanction for noncompliance is still in force, only the sanction for individual mandate was repealed. but there are two different types of employer-mandated sanctions:
Depending on how many employees a business has and how many of them end up looking for coverage on the exchange, the penalty may end up being significantly less if the employer offers coverage that doesn’t provide a minimum value and/or is unaffordable to employers. employees (instead of not offering any coverage).
Employer-sponsored coverage is considered, by default, minimum essential coverage. and small group health plans in effect as of 2014 fully comply with the aca. but the waters can be more murky for large group plans. most of them are robust and offer solid coverage that often exceeds the level of coverage that people tend to buy on the individual market.
But some large employers opt for small plans that don’t provide a minimum value, knowing they can avoid the (potentially higher) penalty they would incur if they didn’t offer any coverage. employees offered these plans don’t always realize that coverage is scant and may not realize they’re eligible for a premium subsidy on the exchange (and if an employer’s coverage drops below minimum value and/or mid-year affordability requirements, covered employees are eligible for a special enrollment period during which they can enroll in a plan through the exchange, with subsidies if income eligible) .