Minimum Essential Coverage

Minimum essential coverage is a requirement that you must have in order to avoid a fee, fine or penalty for not having insurance under the Affordable Care Act. You must maintain this coverage throughout the year, get an exemption, or pay a fee for every month you are not covered. This coverage includes most medical coverage typically provided by employers, but it does not include specific coverages such as those only for accident insurance, dental and vision insurance (when it is not included), or workers’ compensation insurance. The Following are a few types that are considered Minimum Essential Coverage:

  • Medicare Part A
  • Most Medicaid Coverage
  • Coverage Purchased in an Individual Market
  • TRICARE
  • Children’s Health insurance Program
  • Certain types of veteran health coverage
  • Self-funded health coverage offered to students by universities
  • Any Other Government Sponsored Programs

Large Employers must offer an opportunity to enroll in minimum essential coverage to all their full time employees under and employer-sponsored plan. If your employer-sponsored plan covers your dependents then they too, are covered under minimum essential coverage. The following types are a few plans that are NOT considered minimum essential coverage:

  • Vision Only Health Plans
  • Dental Only Health Plans
  • Short term Health Plans
  • Supplemental Medicare Plans

If you are unsure if your health insurance plan is considered minimum essential coverage, ask your provider, and they will be able to tell you if it is. Or you can click here for more information

There are two tests that apply to see if you are eligible for minimum essential coverage and those are as follows:

  • Minimal Value – this assesses the comprehensiveness of a plan.
  • Affordability – this evaluates the individual’s capability to pay for the plan.

Minimal Value:

The plan must offer minimum value by law. This means that a plan would pay for at least 60% of medical expenses on average for a traditional population. There is a minimum value (MV) Calculator released by  The Department of Health and Human Services for employers and individuals to use for this testing. It is likely that most employer-sponsored plans will pass this requirement with little effort. View the Minimum value calculator here.

Affordability:

This test does not look at a whole population, but at each employee individually by comparing what an employee’s earning wages are versus how much the employee will pay for coverage. The employee’s contribution for self-only coverage for the least expensive plan cannot be any more than 9.5% of employee’s household income. If it is, the employee will not be able to afford the plan and the employer has failed to provide minimum essential coverage for that specific employee. Because determining an employee’s household income, is difficult for the employer, the law provides a couple different options for this calculation which are:

  • Rate of pay
  • Box 1 of for W-2

Changes in Health Coverage:

A common question is whether or not an individual will have to pay when they are changing their coverage during the year. The answer is, as long as the gap in coverage is three months or less, you may not owe any payments because you could be eligible for an exemption. Essentially, if you had coverage for at least one day in a calendar month, you are considered covered under minimum essential coverage for that month.