Minimum Essential Coverage

Minimum Essential Coverage is health insurance that meets the requirements of the ObamaCare (the Affordable Care Act). This generally means coverage offers 10 essential benefits and meets actuarial value standards.

Most coverage offered in the employer, private, and public markets count as Minimum Essential Coverage. Meanwhile, short-term and limited benefit coverage is not Minimum Essential Coverage.

Although technically the term Minimum Essential Coverage is defined by source of coverage (i.e. Medicare, Medicaid, marketplace insurance, TRICARE, ) rather than specific benefits, there are some common rules and benefits that minimum essential coverage tends to provide.

For health insurance to be considered minimum essential coverage it must typically have the following qualities:

• Affordability: Plans must cover, on average, at least 60% of out-of-pocket costs on required services. They also have limits on annual deductibles and out-of-pocket maximums.
• Guaranteed Availability of Coverage: You cannot be denied coverage for any reason other than the ability to pay.
• Guaranteed Renewability of Coverage: You must be able to renew the policy regardless of health status.
• Fair Health Insurance Premiums: There are limits to the amount you can be charged based on age, tobacco use, family size, and geography.
• Medical Loss Ratio (the 80/20 Rule): If an insurance company spends less than 80% (85% in the large group market) of premium on medical care and efforts to improve the quality of care, they must rebate the portion of premium that exceeded this limit.
• Ten Essential Benefits: Must provide coverage of at least ten essential health benefits.
• Dollar Limits: Insurers cannot place annual or lifetime dollar limits on Essential Benefits.
• Coverage must provide minimum value (Employer Coverage Only): To meet the Minimum Value requirement, a plan must cover, on average, at least 60 percent of total allowed costs – i.e., what the plan pays versus what the customers pays due to deductibles, copays, and coinsurance. Plans must also have a reasonable out-of-pocket maximum. This essentially means employer-sponsored plans must offer at least the affordability and benefits of a Bronze plan sold on the marketplace.

Below we cover what coverage types are Minimum Essential Coverage, talk a little bit more about the features of Minimum Essential Coverage, and discuss some potential reporting requirements.

UPDATE: From 2014 – 2018, in order to be in compliance with the ACA, you had to maintain Minimum Essential Coverage throughout the year, get an exemption, or pay a fee for each month you go without coverage (although you are allowed less than three months in a row each year without coverage, due to a coverage gap exemption). For, 2019 forward the fee is reduced to zero on a federal level (some states have their own mandate / fees), thus Minimum Essential Coverage mostly just refers to comprehensive coverage that has to follow all of the ACA’s rules and generally offer its benefits rights and protections (unlike, for example, short term coverage).

Most coverage you’ll get inside and outside the Marketplace during that type’s open enrollment period is minimum essential coverage. See the full list of what counts and what doesn’t below.

Qualified Health Plan

A Qualified Health Plan (QHP) provides essential health benefits, follows established limits on cost-sharing (like deductibles, copayments, and out-of-pocket maximum amounts), and meets other requirements under the Affordable Care Act. In other words, all QHPs provide Minimum Essential Coverage.

What Types of Health Insurance are Minimum Essential Coverage?

Minimum essential coverage includes all Government and job-based insurance and most private insurance. As a rule of thumb, if bought major medical insurance on or off the marketplace, were covered through a public program like Medicare, Medicaid, or CHIP, have TRICARE or VA, or were covered through work, you have minimum essential coverage.

In other words, unless you have short term or limited benefit coverage like limited-benefit Medicaid coverage, you have Minimum Essential Coverage.

Minimum Essential Coverage List

Minimum essential coverage includes the following types of health insurance:

• Employer-sponsored coverage (including COBRA coverage and retiree coverage)
• Coverage purchased in the individual market, including a qualified health plan offered through the Health Insurance Marketplace (also known as an Affordable Insurance Exchange)
• Medicare Part A coverage and Medicare Advantage plans
• Most Medicaid coverage
• Children’s Health Insurance Program (CHIP) coverage
• Certain types of veterans health coverage administered by the Veterans Administration
• TRICARE
• Coverage provided to Peace Corps volunteers
• Coverage under the Non-appropriated Fund Health Benefit Program
• Refugee Medical Assistance supported by the Administration for Children and Families
• Self-funded health coverage offered to students by universities for plan or policy years that began on or before Dec. 31, 2014. In later plan or policy years, sponsors of these programs needed to apply to HHS to be recognized as minimum essential coverage
• State high-risk pools for plan or policy years that began on or before Dec. 31, 2014. In later plan or policy years, sponsors of these programs needed to apply to HHS to be recognized as minimum essential coverage

What Doesn’t Count As Minimum Essential Coverage?

Minimum essential coverage does not include coverage providing only limited benefits, such as coverage only for vision care or dental care, and Medicaid covering only certain benefits such as family planning, workers’ compensation, or disability policies.

Most insurance types offered between each year’s open enrollment will be short term health insurance, fixed benefit plans and supplemental insurance. They will not help you avoid the fee on their own, although they will help you be covered in a health crisis.

The following types of health insurance are not minimum essential coverage:

• Short Term Health Plans
• Fixed Benefit Health Plans
• Supplemental Medicare like Part D and Medigap
• Some Medicaid covering only certain benefits
• Vision only, Dental only, and limited benefit plans
• Grandfathered Plans (You will avoid the fee, but won’t get the new rights and protections)

I Didn’t Find My Minimum Essential Coverage Type?

Some of the Minimum Essential Coverage types are less common than the ones listed above. See the full list from the IRS including types that counted as MEC for 2014 only.

Full List of Minimum Essential Coverage (MEC) From IRS

• Group health insurance coverage for employees under –

• A governmental plan, such as the Federal Employees Health Benefit program
• A plan or coverage offered in the small or large group market within a state
• A grandfathered health plan offered in a group market

• Health insurance you purchase directly from an insurance company
• Health insurance you purchase through the Health Insurance Marketplace
• Health insurance provided through a student health plan
• Health coverage provided through a student health plan that is self-funded by a university (only for a plan year beginning on or before December 31, 2014, unless recognized as minimum essential coverage by HHS)
• Catastrophic plans

• Medicare Part A coverage
• Medicare Advantage plans
• Most Medicaid coverage
• Children’s Health Insurance Program (CHIP)
• Most types of TRICARE coverage
• Comprehensive health care programs offered by the Department of Veterans Affairs
• State high-risk health insurance pools (only for a plan year beginning on or before December 31, 2014, unless recognized as minimum essential coverage by HHS)
• Health coverage provided to Peace Corps volunteers
• Department of Defense Nonappropriated Fund Health Benefits Program
• Refugee Medical Assistance

• Coverage consisting solely of excepted benefits, such as:
  • Stand-alone dental and vision insurance
  • Accident or disability income insurance
  • Workers’ compensation insurance

  If you are not sure if your plan will help you avoid the fee, ask your insurer whether or not your plan is “ACA compliant” or counts as “minimum essential coverage.” You can also check the Minimum Essential Coverage (MEC) guidelines for more information.

  What is “Minimum Value?”

  Most major medical plans, including all Private and employer-sponsored, must meet minimum value standards under the ACA. Generally minimum value, in terms of cost-sharing, means that a plan must be equal to a Bronze plan sold on the Health Insurance Marketplace. Thus it must have an actuarial value of at least 60%.

  What Are the Rules For Minimum Essential Coverage?

  For health insurance to be considered minimum essential coverage it typically must follow ObamaCare’s new rules and regulations for health insurance and must include the new benefits, rights, and protections offered by the law. Although technically the term Minimum Essential Coverage is defined by the source of coverage (ie Medicare, Medicaid, marketplace insurance, TRICARE, ) rather than specific benefits, there are some common rules and benefits that minimum essential coverage tends to provide.

  Please note that rules for each type of minimum essential coverage are different. In fact the main reason minimum essential coverage is based on the source of insurance and not the benefits is to ensure certain types of insurance count as coverage. For instance, employer-sponsored insurance has to meet different standards than Medicaid, but both are considered minimum essential coverage. Also note that some grandfathered plans will help you to avoid the fee for not having minimum essential coverage even though they don’t technically meet the ACA’s new standards.

  The list of rules below apply in full only to private major medical health insurance plan, with many aspects applying to other types.

  That list noted above again is:

  • Affordability: Plans must cover, on average, at least 60% of out-of-pocket costs on required services. They also have limits on annual deductibles and out-of-pocket maximums.
  • Guaranteed Availability of Coverage: You cannot be denied coverage for any reason other than the ability to pay.
  • Guaranteed Renewability of Coverage: You must be able to renew the policy regardless of health status.
  • Fair Health Insurance Premiums: There are limits to the amount you can be charged based on age, tobacco use, family size, and geography.
  • Medical Loss Ratio (the 80/20 Rule): If an insurance company spends less than 80% (85% in the large group market) of premium on medical care and efforts to improve the quality of care, they must rebate the portion of premium that exceeded this limit.
  • Ten Essential Benefits: Must provide coverage of at least ten essential health benefits.
  • Dollar Limits: Insurers cannot place annual or lifetime dollar limits on Essential Benefits.
  • Coverage must provide minimum value (Employer Coverage Only): To meet the Minimum Value requirement, a plan must cover, on average, at least 60 percent of total allowed costs – i.e., what the plan pays versus what the customers pays due to deductibles, copays, and coinsurance. Plans must also have a reasonable out-of-pocket maximum. This essentially means employer-sponsored plans must offer at least the affordability and benefits of a Bronze plan sold on the marketplace.

  What If I Don’t Have Minimum Essential Coverage?

  Not having minimum essential coverage means your plan doesn’t offer all the benefits, rights, and protections of the ACA.

  With that noted, for 2014 – 2019 specifically, if you didn’t have minimum essential coverage or an exemption, you paid a shared responsibility fee for each month you are without minimum essential coverage each year on your taxes.

  Reporting Minimum Essential Coverage

  You’ll have to report which months you or a dependent had minimum essential coverage each year on your 1040 Federal Income Taxes starting April 15, 2015.

  Even if you don’t have to report this information for the fee, you may still need it for marketplace cost assistance!

  If you or a dependent didn’t have minimum essential coverage for any month during the year or an exemption, you will have to make a Shared Responsibility Payment (capped at the national average of a bronze plan) for each month without coverage. Your insurer will send you a 1095-A, 1095-B, or 1095-C form which will tell you which months you had coverage and what cost assistance amounts you received. You will use that form to fill out Form 8962, Premium Tax Credit (PTC) if you received cost assistance. You will attach any related forms to your tax return along with your calculation Shared Responsibly Payment when you report minimum essential coverage.

  Minimum Essential Coverage and the Shared Responsibility Provision

  Remember the fee is repealed 2019 forward in most states, so the next section of information won’t apply to most citizens.

  The Affordable Care Act contains a section called “Shared Responsibility for Health Care“. This section includes rules for individuals and families in regards to what types of health insurance they must have and what types of health insurance employers must provide to avoid their respective “shared responsibility fees”. These types of health insurance are known as minimum essential coverage.

  These health insurance types are based on source for the most part, rather than benefits, but do include a few rules for employers such as how much of an employee’s premium must be covered and what share of out-of-pocket costs a plan must provide. The types of health insurance that must be maintained to avoid the fee and be in compliance with the shared responsibility requirement is called Minimum Essential Coverage.

  In short, minimum essential coverage is the type of coverage you’ll need to avoid the shared responsibility fee under the Affordable Care Act.

  Individual Mandate and Employer Mandate? The common names for the requirement to maintain minimum essential coverage or pay a shared responsibility fee are the individual mandate (for individuals and families) and the employer mandate (for employers).

  Know the Law: Minimum Essential Coverage

  You can learn more about minimum essential coverage by checking out the following sections of the law and other official resources:

  How to Get Minimum Essential Coverage

  For most Americans getting minimum essential coverage will mean buying a qualified health plan either inside or outside the health insurance marketplace, getting covered through work, or getting public health insurance through Medicare, Medicaid, and CHIP. Please see the types of minimum essential coverage above to know all your options.

  

  ObamaCare and Minimum Essential Coverage
  

  Author: Thomas DeMichele

  Thomas DeMichele is the head writer and founder of ObamaCareFacts.com, FactsOnMedicare.com, and other websites. He has been in the health insurance and healthcare information field since 2012. ObamaCareFacts.com is a.

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