Minimum essential coverage is health insurance coverage that satisfies the Affordable Care Act‘s shared responsibility provision (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 is still important.
There are several types of qualifying events that only trigger special enrollment periods if the person already had minimum essential coverage prior to the qualifying event. And some states have imposed their own individual mandates, with penalties for residents who don’t maintain minimum essential coverage.
What plans are considered minimum essential coverage?
Plans do not have to be compliant with the ACA in other to be considered minimum essential coverage, as there are plans that predate ACA implementation that still count as having 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 grandmothered plans), TRICARE, Medicare, most Medicaid plans, and CHIP, among others.
What plans are not considered minimum essential coverage?
Policies that are not major medical coverage and 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 Services coverage on its own is also not considered minimum essential coverage, although Native Americans have access to year-round enrollment in the exchange (with zero-cost-sharing if income doesn’t exceed 300 percent of the poverty level), and were exempt from the ACA’s individual mandate penalty during the years that it was assessed.
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 mandate penalty.
But the concept of minimum essential coverage remains important for special enrollment period eligibility: If a person 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 prior coverage was via a health care sharing ministry. The same is true for people whose previous coverage was a short-term plan, fixed-indemnity plan, discount plan, etc.
Minimum essential coverage versus minimum value
The terms minimum essential coverage and minimum value both stem from the ACA, and are sometimes conflated. But they mean two different things. Minimum essential coverage, as described above, is coverage that satisfies the ACA’s individual mandate.
Minimum value, on the other hand, is a measure of whether a plan offered by a large employer provides adequate coverage. In order to provide minimum value, an employer-sponsored plan must
- cover at least 60 percent of the average medical costs across a standard population (ie, similar to a bronze plan in the individual and small group market), and
- provide “substantial coverage” for inpatient care and physician treatment.
Large group plans do not have to cover the ACA’s essential health benefits, and they do not have to fall into one of the ACA’s metal level ranges. The minimum value provision is instead used as the basic requirement that large employer plans must meet or exceed.
A large employer’s plan has to be both affordable and provide minimum value. If it’s not, and at least one employee obtains subsidized coverage in the exchange in lieu of the employer’s plan, the employer will be on the hook for the ACA’s employer mandate penalty.