Minimum Essential Coverage may not provide all Essential Health Benefits and in some cases it might not provide even Minimum Value. As if health insurance weren't already confusing enough.
Minimum Essential Coverage (MEC) should not be confused with Essential Health Benefits (EHB). MEC is the minimum amount of coverage that an individual must have to meet the health insurance mandate and avoid a penalty. EHB refers to 10 categories of healthcare services insurance companies must now cover.
Note: Starting with the 2019 plan year (for which you will file taxes in April 2020), the individual mandate no longer applies at the federal level. However, a few states have an individual mandate.
Most insurance qualifies as MEC.
♦ Coverage provided by employers, plans bought both on and off the Marketplace. Other coverage like Medicare, most Medicaid, Chip, Tricare, and Cobra can also satisfy this requirement.
Minimum essential and skinny
The majority of health insurance plans provide coverage well above the minimum requirements set by the Affordable Care Act for MEC plans.
Insurance companies can no longer sell bare-bones plans that pay virtually nothing.
Words of caution: the GOP has proposed allowing insurance companies to start selling bare-bones plans once more under the guise of “cheaper.”
Consumer Reports calls them "junk health insurance."
♦ Insurance companies can still sell plans with just enough coverage to meet the bare minimum requirements under the ACA and avoid being called "junk."
Consumers are expected to read and understand what they are buying.
Minimum essential coverage and Essential health benefits
Minimum Essential Coverage is often confused with Essential Health Benefits (EHB). Minimum Essential is more like a health plan with Essential Health Benefits Lite.
MEC plans provide a lower level of coverage than plans providing EHB. Some companies have been able to craft their group plans in such a way as to meet the MEC standard while not providing all essential health benefits.
• Beware — all plans sold through the marketplaces must be certified as a Qualified Health Plan. To receive that certification they must provide all essential health benefits.
Requiring insurance companies to cover certain essential health benefits is a basic step toward comprehensive health insurance for everyone.
Essential health benefits
A set of 10 categories of health care services that health plans must cover to meet requirements of the Affordable Care Act.
♦ Before the ACA — Insurers sold plans that did not cover all or set dollar limits. Now all plans must provide these services and without attaching annual dollar limits.
♦ Before the ACA — millions of people who purchased insurance on their own could not get many of the benefits that are now called essential.
♦ 75% of plans did not provide maternity coverage and many of those that did required a waiting period. If you wanted to have a baby, you had to work for a large company or negotiate on your own with hospitals.
♦ 25% of plans provided no coverage for substance abuse or mental health treatment
♦ 10% of plans did not even cover prescriptions
Today — Essential health benefits include at least the following items and services:
• Outpatient care—the kind you get without being admitted to a hospital
• Trips to the emergency room
• Treatment in the hospital for inpatient care
• Maternity care before and after your baby is born
• Mental health and substance use disorder services: This includes behavioral health treatment, counseling, and psychotherapy
• Prescription drugs
• Services and devices to help you recover if you are injured, or have a disability or chronic condition. This includes physical and occupational therapy, speech-language pathology, psychiatric rehabilitation, and more.
• Lab tests
• Preventive services including counseling, screenings, and vaccines to keep you healthy and care for managing a chronic disease. Physicals would fall under preventive services. Learn more about Preventive Services and what you can expect to pay.
• Pediatric services: This includes dental care and vision care for kids.
• Specific health care benefits may vary by state. Even within the same state, there can be small differences between health insurance plans.
• States expanding their Medicaid programs must provide these benefits to people newly eligible for Medicaid.
♦ Keep in mind, it is possible for a health insurance plan to not provide EHB and still meet the requirements for MEC. This makes it critical that you read and understand a plan's summary of benefits before buying.
To comply with the individual mandate an individual must have at the least a MEC plan to be able to avoid a tax penalty.
Minimum essential and Minimum value
MEC plans are often confused with the words Minimum Value (MV).
Minimum Value is a measure of a plan’s comprehensiveness, how much it is estimated to pay.
• It is minimum coverage that applies to job-based health plans.
Larger employers usually offer at least one plan with a MV of 60% or greater, which means the plan is expected to cover 60% or more of total medical expenses.
Not all MEC health plans provide minimum value. Grandfathered plans with really high deductibles or skinny bare-bones plans may just satisfy requires for the Affordable Care Act but come up short on value.
Why is minimum value important?
If your employer’s plan meets this standard and is considered “affordable,” you won’t be eligible for a premium tax credit if you buy a Marketplace insurance plan instead. Read more about Affordable Coverage.
A health plan meets the minimum value standard if both of these apply:
• It’s designed to pay at least 60% of the total cost of medical services for a standard population
• Its benefits include substantial coverage of physician and inpatient hospital services
If your employer offered only a plan with a MV of less than 60% it would not meet the MV standard. You may then be eligible for a premium tax credit even if your employer's plan is considered "affordable."
If you enrolled in a plan with a MV of less than 60% the plan may still meet the requirements for minimum essential coverage.
However, it would be best to explore your options from the Marketplace first before choosing such a plan. Because, by enrolling in such plan you will then not be able to receive a premium tax credit.
The premium tax credit is only available for plans purchased from the Marketplace.
How do I know the minimum value of a plan?
Every health insurance plan has a description of benefits.
Most plans call it a Summary of Benefits and Coverage. The summary will disclose if the plan meets the Minimum Value.
The summary may not state the actual percentage but it should state Yes or No.
Types of health coverage that usually count as MEC
Employer-sponsored group health plans
Retiree health plans
Individual health insurance that you buy on your own (a Marketplace plan)
Student health insurance plans
The Children’s Health Insurance Program (CHIP)
TRICARE (military health coverage)
Veterans’ health care programs
Peace Corps Volunteer plans
What types of insurance are not considered MEC?
Policies that only cover things like vision or dental care
Plans that offer discounts on prescription drugs or doctor visits
Plans that pay for specific conditions, such as cancer plans
Indemnity policies (pay a fixed dollar amount per day)
Short-term health plans
Accident or disability insurance
AmeriCorps / AfterCorps coverage
Medicaid coverage providing only limited benefits such as: pregnancy-related only or only tuberculosis-related services.
♦ Most Medicaid coverage provides full benefits and is considered MEC. People who are eligible for this coverage are ineligible for the premium tax credit.
Be aware that some States do provide limited Medicaid which do not qualify for MEC.
What if I have minimum essential coverage only part of a month?
If you have MEC for at least one day of the month you are considered to have MEC for that entire month.
How do I report that I had coverage ?
You need to report on your Federal income tax form the months you had coverage. So in 2018 when you file taxes you need to report your situation for tax year 2017.
If you claim any dependents you also need to report the number of months they had coverage. If you and everyone else claimed on your taxes had coverage all year you can check a box stating that.
How does the IRS know I had health insurance?
The health insurance company you purchased from will report to the IRS. They will report the number of months you had coverage.
The insurance company will send you this same information on Form 1095-B. You do not have to submit the form with your taxes, just keep for your records.
The IRS will also be informed if you were offered coverage by a large employer. The employer will tell the IRS if the offer was affordable and met the minimum value standard.
The IRS will learn from the employer whether or not you accepted insurance. The employer will issue Form 1095-C, which you do not need to submit with your taxes.
How much is the penalty for not having coverage?
The penalty is either a flat amount or a percentage of household income, whichever is greater. The amount of the penalty increases each year.
The penalty amount can change depending on tax filing status and household income.Learn how the penalty is calculated.
December 22, 2017
President Trump signed into law a Republican crafted tax bill. The bill will eliminate the individual mandate requiring people to purchase health insurance.
It takes effect starting in 2019.
How do I pay the penalty?
You pay the penalty when you file taxes. The penalty will reduce any refund you may be planning on.