What to Know About ACA Minimum Essential Coverage
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Minimum essential coverage, also called qualifying health coverage, is any health plan that meets Affordable Care Act (ACA) requirements for having health coverage. Qualifying plans include marketplace insurance, job-based health plans, Medicare, Medicaid and the Children's Health Insurance Program (CHIP).
Under the original law, you paid a tax penalty if you didn't maintain minimum essential coverage or qualify for an exemption. The federal government did away with the penalty beginning in 2019, but some states still charge fees to people without minimum health coverage.
What is minimum essential coverage?
Minimum essential coverage is an insurance plan that meets the ACA standards for a qualified health plan. A qualified health plan must be certified by the federal Health Insurance Marketplace, provide 10 essential health benefits required by the ACA and follow federal limits on fees like deductibles and copays.
Qualifying plans can be marketplace insurance, job-based health plans, Medicare, Medicaid or a Children's Health Insurance Program (CHIP) policy.
What are the 10 minimum essential health benefits?
Health insurance plans must cover 10 categories of services under the ACA, called minimum essential health benefits. The categories include doctors’ services, hospital care, prescription drug coverage, pregnancy and childbirth.
- Outpatient care
- Emergency services
- Hospitalization
- Pregnancy, maternity and newborn care
- Services for mental health and substance use disorders
- Prescription drugs
- Rehabilitation services and devices
- Laboratory services
- Preventive, wellness and chronic disease services
- Pediatric services
How do I meet the ACA minimum essential coverage requirement?
While federal law no longer assesses penalties for not having health insurance, you must still maintain an active health care policy. To meet the ACA requirement, you must enroll in a plan that provides minimum essential coverage — sometimes called "qualifying health coverage." Examples include marketplace plans, job-based coverage, Medicare, Medicaid and the Children's Health Insurance Program (CHIP). Below are the plan types that meet the ACA coverage requirement.
Individual, family or employer plans
- Plans purchased on a state or federal health insurance exchange
- Individual health plans bought outside a health insurance exchange that meet the standards for qualified health plans
- Any grandfathered plan bought outside a health insurance exchange
- Employer-sponsored plans including COBRA and retiree plans
- Coverage under a parent's marketplace or job-based plan
- Most student health plans ?
State or federal insurance plans
- Medicare Part A
- Medicare Advantage plans, also known as Medicare Part C
- Most Medicaid coverage, except for limited coverage plans
- Children's Health Insurance Program (CHIP)
- Most TRICARE plans, also known as uniformed services health care programs
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Certain plans offered by the Department of Veterans Affairs (VA), including:
- VA health care program
- Civilian Health and Medical Program (CHAMPVA)
- Spina bifida health care program
- Health coverage for Peace Corps volunteers
- State high-risk pool plans that became effective on or before Dec. 31, 2014
- Department of Defense Nonappropriated Fund (DoD NAF) Health Benefits Program
- Refugee Medical Assistance (RMA) plans from the Administration for Children and Families
What doesn't count as minimum essential coverage?
Some insurance plans do not qualify as minimum essential coverage under the ACA. These plan types don't provide essential health benefits, are not required to cover preexisting conditions and are not regulated by the ACA.
- Coverage only for vision care or dental care
- Workers' compensation
- Coverage only for a specific disease or condition
- Plans that offer only discounts on medical services
Who needs minimum essential coverage?
You need minimum essential coverage if you are a U.S. citizen living in the U.S. or abroad, are a permanent resident or qualify as a resident alien for tax purposes. Residents of U.S. territories are exempt from the law.
While there is no longer a federal penalty for failing to maintain coverage, residents of five states may pay fees if they don't have minimum coverage or qualify for an exemption.
What happens if I don't have minimum essential coverage?
Although you are still technically required to maintain minimum essential coverage, there is no longer a federal penalty for not having health insurance. But if you don't have coverage or qualify for an exemption, you'll pay a penalty when filing state income taxes in California, Massachusetts, New Jersey, Rhode Island and Washington, D.C. And while you're not penalized financially in Vermont, you must report whether you have coverage when filing your state tax returns.
Penalties vary by state and generally increase yearly based on inflation.
California
The current penalty for not having coverage in California is $800 per adult and $400 per dependent child. Penalties are calculated monthly, so a single person without coverage for one month pays one-twelfth the full penalty amount, or $66.67. California permits several penalty exemptions, such as having a coverage gap of three months or less.
Massachusetts
In Massachusetts, tax penalty amounts vary by income and family size but can't be more than 50% of the least expensive plan offered on the Massachusetts health insurance exchange. You won't be not penalized if you cannot afford the plans available to you or your income is at or below 150% of the federal poverty level.
New Jersey
If you don't have insurance or qualify for an exemption, you'll pay a penalty (called a shared responsibility payment) when filing your New Jersey tax return. The penalty is based on income, family size and the average cost for Bronze health plans in New Jersey.
Rhode Island
Residents of Rhode Island could face a penalty of $695 for each uninsured adult and $347.50 for each uninsured child under age 18, or 2.5% of the annual household income — whichever is greater. The household penalty can’t be more than the annual premium for an average bronze plan in Rhode Island.
Washington, D.C.
The penalty in Washington, D.C., is either 2.5% of the gross household income or $695 per individual and $347.50 per child, whichever is greater. Penalties are based on the number of months you or your family go without health coverage.
Frequently asked questions
Do I need proof of minimum essential coverage for my tax return?
You do not need to include proof of minimum essential coverage with federal taxes filed in 2020 and beyond. And since federal penalties no longer apply, the federal health coverage exemptions form was also discontinued in 2020.
What is non-ESI minimum essential coverage?
Non-ESI minimum essential coverage is health insurance from an organization other than an employer, such as Medicaid or Medicare. You may see this term used in a letter from HealthCare.gov stating you have conditional eligibility due to being enrolled in non-ESI coverage. If you receive this notice, you'll have 90 days to provide documents explaining your situation.
Is the coronavirus vaccine covered by my health insurance?
The COVID-19 vaccine has no costs regardless of your insurance carrier or if you have coverage at all. There may be an administration fee for delivering the shot, but vaccine providers should seek reimbursement directly from your insurance provider or the Health Resources and Services Administration’s Provider Relief Fund. This initiative was created to remove financial barriers that may prevent people from obtaining the vaccine.
Methodology
Information on federal tax penalties and filing requirements was obtained through the Internal Revenue Service (IRS). Federal requirements and definitions on items such as minimum essential coverage and qualifying health plans were sourced from Centers for Medicare & Medicaid Services (CMS) and Healthcare.gov. We obtained state-specific coverage requirements and penalty information directly from corresponding state websites.
Editorial note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.