Know about Minimum Essential Coverage, an ACA Terminology, that often Confuses Consumers

ACA-complaint health plans

What is the Minimum Essential Coverage?

Health insurance companies before the Affordable Care Act used to deny coverage to people having pre-existing medical conditions, or to people who used too much medical care. However, with the coming up of the Affordable Care Act, ACA-complaint health plans are required to help enrollees pay for certain medical services, irrespective of their health status and the type of health plan they have. This is referred to as minimum essential coverage. Before the ACA, as long as the people had minimum essential coverage in place, they were not subjected to the ACA’s individual mandate penalty. The concept of minimum essential coverage still holds significance because there are several circumstances during which people should have minimum essential coverage in place before a qualifying event, so they have a special enrollment period triggered due to the qualifying event.

What is considered as Minimum Essential Coverage

A variety of plans cover minimum essential coverage and thus meet the ACA’s individual mandate. People are considered to have minimum essential coverage if they have any of the following plans and were not subjected to a tax penalty for being uninsured. People having essential coverage before having a qualifying event, then they become eligible for a special enrollment period. Following plans were counted as minimum essential coverage:

  • Coverage obtained through the state ACA exchange
  • ACA-compliant coverage obtained directly from the insurer, or through an agent.
  • Employer-sponsored coverage including COBRA coverage and retiree health plans.
  • Coverage through ACA Basic Health Plan, which is available only in Minnesota and New York.
  • Grandfathered health plans
  • Grandmothered health plans
  • Medicare
  • Medicaid
  • The Children’s Health Insurance Program
  • Student Health Insurance
  • TRICARE coverage
  • Most States high-risk pool coverages
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Here people need to keep in mind that some of the above-stated health plans having minimum essential coverage are compliant with the ACA such as employer-sponsored health plans effective from the start of 2014. Whereas some of the health plans offering minimum essential coverage are not compliant with the ACA, or these plans were not heavily regulated by the ACA, such plans include grandmothered and grandfathered plans, high-risk pools, Medicare, and Medicaid. So if the health plan doesn’t meet the ACA-compliance guidelines, or pre-dates the ACA, it does not necessarily mean that it is not minimum essential coverage.

What is not counted as Minimum Essential Coverage?

Health insurance plans that do not offer comprehensive coverage are not considered as the minimum essential coverage plans. These plans are designed just to supplement other plans, or to provide only some limited benefits that do not offer minimum essential coverage. Thus, people having any of these plans as their sole coverage are not considered eligible for a special enrollment period on experiencing a qualifying event that requires prior coverage. Enrollees of such plans are subjected to the shared responsibility provision if they live in DC, Massachusetts, New Jersey, California, Rhode Island, or Vermont. Health plans that don’t offer minimum essential coverage include:

  • Plans that are not regulated by the healthcare reform law such as stand-alone dental and vision coverage, critical illness plans, accident supplements, fixed-indemnity plans, workers’ comp coverage, etc.
  • Short-term health plans
  • Some of the limited benefit Medicaid plans
  • AmeriCorps coverage

Difference between Minimum Value and Minimum Essential Coverage

Though both Minimum Value and Minimum Essential Coverage are the terms introduced by the ACA, having similar sounds but have different meanings. As stated above, minimum essential coverage is coverage that complies with the ACA’s individual mandate, and coverage that meets prior coverage requirements when a qualifying event requires prior coverage to trigger a special enrollment period. Whereas the Minimum value has to fulfill the employer mandate law and with premium subsidies eligibility in the exchange when a person obtains plan offered by an employer of any size. Under the Affordable Care Act, employers with 50 or more full-time equivalent employees have to provide health insurance to their full-time employees. To meet the employer mandate and to avoid tax penalties two basic rules apply in terms of the coverage itself:

  • Affordable health insurance premiums, which means that insurance should not cost employees more than 9.78% of household income in 2020 for just the employee’s coverage.
  • The coverage has to provide minimum value, it means that the plans will cover at least 60 percent of medical costs for an average population and will offer substantial coverage for inpatient and physician services.
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Though employers with fewer than 50 full-time employees are not required to offer coverage still many of them do offer coverage. Regardless of the size of the employer, if an employee is offered a plan that is considered affordable and that provides minimum value, the employee does not qualify for premium subsidies that offset the individual market plan cost in the exchange. Even the family members of the employees are not eligible for subsidies, as it is assumed that they are allowed to enroll in the employer-sponsored plan. Thus, if the employee or their family wishes to decline the employer’s offer and buy their own plan, then they have to pay the full price of the plan, as long as the employer’s coverage is affordable and provides minimum value.

Large employers generally offer plans providing minimum value because employer-sponsored plans are fairly robust because they prefer avoiding the employer mandate penalty. Employer-sponsored coverage is considered as minimum essential coverage. However, the two terms have different meanings and significance.

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