What Is Minimum Essential Coverage, and Why Does It Matter?

Minimum Essential Coverage: ACA Terminology That's Often Confusing

What does it mean to have minimum essential coverage?
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You may have heard the term minimum essential coverage, and you may know that it stems from the Affordable Care Act (ACA). But if you're like most people, you might be wondering how it differs from other common terms, like "ACA-compliant coverage" and "minimum value." So let's dig into what it means to have minimum essential coverage, and why it matters.

What Does "Minimum Essential Coverage" Mean?

Minimum essential coverage is defined as coverage that is deemed acceptable for fulfilling the ACA's individual shared responsibility provision—aka, the individual mandate. In other words, as long as you had minimum essential coverage in place from 2014 through 2018, you weren't subject subject to the ACA's individual mandate penalty Even if you didn't have minimum essential coverage, you weren't subject to the penalty if you qualified for an exemption, but that's not the same as having minimum essential coverage (for example, people with health care sharing ministry coverage were exempt from the individual mandate penalty, but health care sharing ministry plans are not minimum essential coverage).

There is still an individual mandate in 2019 and beyond, but there is no longer a penalty for non-compliance, unless you live in the District of Columbia, New Jersey, Massachusetts (or California, Rhode Island, or Vermont starting in 2020). However, the concept of minimum essential coverage is still important, as there are several circumstances in which a person must have had minimum essential coverage in place prior to a qualifying event, in order to have a special enrollment period triggered by the qualifying event.

It's important to understand that coverage does not necessarily have to be ACA-compliant in order to be considered minimum essential coverage.

What Counts as Minimum Essential Coverage?

There are a variety of plans that count as minimum essential coverage, and thus satisfy the ACA's individual mandate. If you had one of the following types of insurance from 2014 through 2018, you were considered covered and not subject to a tax penalty for being uninsured. And if you have one of them prior to one of the qualifying events that require prior coverage, you'll be eligible for a special enrollment period:

  • Coverage provided by an employer, including COBRA coverage and retiree health plans
  • Coverage you've obtained through the ACA exchange in your state
  • Coverage under an ACA Basic Health Program (only Minnesota and New York have such plans)
  • ACA-compliant coverage that you've obtained outside the exchange (directly from the insurer, or via an agent or broker)
  • Grandmothered health plans (plans took effect after the ACA was signed into law in March 2010, but before the bulk of the ACA's provisions took effect in 2014). These plans are not fully compliant with the ACA, but they've been allowed to remain in place in many states.
  • Grandfathered health plans (plans were already in effect when the ACA was signed into law in March 2010 and have not been significantly changed since then). These plans are not fully compliant with the ACA, but they're allowed to remain in place indefinitely, in every state. Insurers have the option to discontinue them, however, so there is never any guarantee that these plans will continue to be available as time goes on.
  • Student health insurance that is ACA-compliant, or self-insured student health coverage that has been approved as minimum essential coverage. All student health plans are required to be ACA-compliant if they're provided to a school's students by an insurance company. If the school self-insures its student health plan, the coverage does not have to be ACA-compliant, but these schools can opt to make their plans ACA-compliant and get it certified as minimum essential coverage.
  • Medicare Part A or Medicare Advantage (you can also have Medicare Part B, Medicare Part D, or a Medigap plan, but those aren't the parts that are considered minimum essential coverage)
  • Children's Health Insurance Program (CHIP) coverage
  • Most Medicaid coverage. Some types of Medicaid coverage are not technically considered minimum essential coverage, including Pregnancy Medicaid, Medically Needy Medicaid, and CHIP Unborn Child. But under new federal rules issued in 2019, these types of coverage do fulfill the prior coverage requirement in the case of a qualifying event that requires the person to have had coverage before the qualifying event in order to be eligible for a special enrollment period.
  • TRICARE (military) coverage, Nonappropriated Fund Health Benefit Program coverage, and comprehensive Veterans Administration (VA) coverage
  • Refugee Medical Assistance
  • Most state high-risk pool coverage (in states that still operate high-risk pools)

Some types of minimum essential coverage are compliant with the ACA, including employer-sponsored plans effective since the start of 2014 (although the ACA rules are different for large and small group plans), and individual market plans that took effect in January 2014 or later.

But other types of minimum essential coverage are not compliant with the ACA, or were not heavily regulated by the ACA. This includes grandmothered and grandfathered plans, high-risk pools, and Medicare and Medicaid (there are some ACA provisions that apply to some of these types of coverage, but not to the degree that individual and small group plans are regulated).

So the fact that your plan doesn't meet the guidelines for ACA compliance, or pre-dates the ACA, does not necessarily mean that it's not minimum essential coverage. If in doubt, check with your plan administrator to find out for sure.

What Does Not Count as Minimum Essential Coverage?

In general, coverage that isn't comprehensive is not considered minimum essential coverage. So plans that are designed to supplement other coverage, or to provide only limited benefits, are not considered minimum essential coverage.

If you rely on one of these plans as your sole coverage, you will not be eligible for a special enrollment period if you experience a qualifying event that requires prior coverage (most of them do). And you will likely be subject to the shared responsibility provision if you live in DC, Massachusetts, New Jersey, California, Vermont, or Rhode Island.

Examples of plans that aren't minimum essential coverage include:

  • Anything that's considered an "excepted benefit" under the ACA, which means it's not regulated by the healthcare reform law. This includes stand-alone dental and vision coverage, fixed-indemnity plans, accident supplements, critical illness plans, workers' comp coverage, etc. In general, excepted benefits were never designed to serve as a person's sole source of coverage—they're supposed to supplement a "real" health insurance plan.
  • Short-term health insurance plans, including the short-term coverage that's offered to recently returned Peace Corps Volunteers. Even though short-term health plans can now last for up to three years (including renewals) in many states, the termination of a short-term plan does not trigger a loss-of-coverage special enrollment period. So a person losing short-term coverage would not be able to enroll in ACA-compliant coverage until the next annual open enrollment period.
  • Some limited benefit Medicaid plans (coverage is limited to only family planning, or only pregnancy-related care, or only emergency care, etc.). As noted above, HHS has changed the rules to allow these plans to count as "prior coverage" in situations where a person experiences a qualifying event that requires prior coverage in order to trigger a special enrollment period. But the distinction is still important, as a person eligible for only non-MEC Medicaid coverage is also eligible for premium subsidies in the exchange (if their income makes them eligible), whereas a person eligible for minimum essential coverage Medicaid would not be eligible for any subsidies in the exchange.
  • AmeriCorps coverage (but AmeriCorps members do qualify for a special enrollment period—at both the start and end of their service—during which they can enroll in an ACA-compliant plan in their state's exchange)

Does Minimum Value Mean the Same Thing as Minimum Essential Coverage?

Minimum value and minimum essential coverage are both terms that were introduced with the ACA. And although they sound similar, they have different meanings.

As described above, minimum essential coverage is coverage that fulfills the ACA's individual mandate, and coverage that fulfills prior coverage requirements when a qualifying event requires prior coverage in order to trigger a special enrollment period.

Minimum value, however, has to do with the law's employer mandate, and with eligibility for premium subsidies in the exchange when a person has access to a plan offered by an employer of any size.

Under the ACA, employers with 50 or more full-time equivalent employees are required to offer health insurance to their full-time (30+ hours per week) employees. To comply with the employer mandate and avoid potential tax penalties, there are two basic rules that apply in terms of the coverage itself:

  • The premiums have to be affordable (which means it costs the employee no more than 9.78% of household income in 2020, for just the employee's coverage).
  • The coverage has to provide minimum value, which means that it will cover at least 60 percent of medical costs for an average population, and provide "substantial" coverage for inpatient and physician services.

Although small employers (fewer than 50 full-time equivalent employees) are not required to offer coverage, many of them do. And regardless of the size of the employer, if an employee is offered coverage that is considered affordable (no more than 9.78% of household income in 2020 for just the employee's coverage) and that provides minimum value, the employee is not eligible for premium subsidies to offset the cost of an individual market plan in the exchange. The employee's family members are also not eligible for subsidies, assuming they're allowed to enroll in the employer-sponsored plan. So if the employee and/or their family wanted to decline the employer's offer of coverage and obtain their own privately purchased plan, they would have to pay full price as long as the employer's offer of coverage is considered affordable and provides minimum value.

Large employers typically offer plans that provide minimum value, both because employer-sponsored plans have tended to be fairly robust, and because employers want to avoid the employer mandate penalty. Employer-sponsored coverage is also considered minimum essential coverage, but it's clear that the two terms have different meanings.

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Article Sources
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