What is Minimum Essential Coverage (MEC)?
Minimum Essential Coverage is the type of coverage you’ll need to avoid the fee for not having insurance under ObamaCare (the Affordable Care Act). In order to be in compliance with the law you must maintain minimum essential coverage throughout the year, get an exemption, or pay a fee for each month you go without it (although you are allowed less than three months in a row each year without coverage, due to a coverage gap exemption). You’ll report minimum essential coverage on your Federal Income Taxes for each month you or a dependent had coverage.
Benefits and Minimum Essential Coverage Types
The Affordable Care Act creates a lot of new rules and regulations for health insurance and adds some ground-breaking new benefits, rights, and protections. Some types of health insurance are required to follow all of ObamaCare’s rules, and some aren’t. Most major medical plans, which have to follow the majority of rules set forth by the ACA, count as minimum essential coverage. Minimum essential coverage is based on a source rather than a specific benefit or rule. You can find the types of coverage considered minimum essential coverage below.
What Types of Health Insurance are Minimum Essential Coverage?
To avoid the fee for not having health insurance, you’ll have to obtain “minimum essential coverage” and maintain it throughout the year. Minimum essential coverage includes all Government and job-based insurance and most Private Insurance. As a rule of thumb, if you were allowed to keep your health insurance in 2014, bought major medical insurance on or off the marketplace, were covered through a public program, or were covered through work, you typically had 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
- 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 program 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
|Coverage Type||Qualifies As Minimum Essential Coverage||Doesn’t Qualify As Minimum Essential Coverage|
|Individual health coverage:
|Coverage under government-sponsored programs:
|Certain coverage that may provide limited benefits:
*In Notice 2014-10, the IRS announced relief from the individual shared responsibility payment for months in 2014 in which individuals are covered under one of these programs. See the instructions for Form 8965, Health Coverage Exemptions, for information on how to claim an exemption for one of these programs on your income tax return.
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 If I Don’t Have Minimum Essential Coverage?
If you don’t have minimum essential coverage for most of 2014 and beyond, and don’t obtain an exemption, you’ll pay a shared responsibility fee for each month you are without minimum essential coverage each year. This is true even if you have coverage that doesn’t count as minimum essential coverage, like short-term health insurance. Learn more about ObamaCare’s individual mandate here.
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. 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
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).
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 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.
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.
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:
More information can be found under: Title I – Subtitle F—Shared Responsibility for Health Care
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.