Minimum Essential Coverage is defined under The Affordable Care Act (Obamacare) as healthcare coverage that fulfills all the necessary requirements for an individual to comply with the individual mandate. Individuals having coverage that falls under Minimum Essential Coverage would not pay any of the fees associated with the individual mandate. The law establishes a wide array of coverage sources that would fulfill this benchmark, as well as setting standards for when it comes to the benefits provided by different insurance plans.
In establishing a standard for coverage, the law also needed to designate which existing forms of healthcare coverage would be sufficient under these regulations. While a large portion of Obamacare focused on regulating the individual market by creating standards for benefits and care, only a small fraction of the US population actually purchases coverage through the individual market. The rest receive coverage through plans sponsored by employers, public health plans and even universities. Minimum essential coverage as defined by the law effectively outlines which forms of healthcare coverage fulfill the requirements of the individual mandate.
What Is Considered Minimum Essential Coverage?
Consumers concerned about fulfilling the individual mandate and avoiding the financial ramifications of paying the penalties we've broken down the types of healthcare coverage that are considered minimum essential coverage. One of the confusing aspects of the term minimum essential coverage is that it deals more with what sources of coverage count, rather than the cost sharing and services that a particular form of healthcare coverage provide. To help you out we'll go through what constitutes minimum essential coverage and what there is to know about the benefits that may or may not be included.
- Plans Purchased on the Individual Market: These are plans that households enroll in directly with a carrier or purchased on the health insurance exchanges, provided that they meet the standards set out by the Affordable Care Act. New health plans introduced for 2014 and after must fulfill the standards set by the law. Some plans that were sold on the individual exchange prior to 2014 and where "grandfathered" may not meet all these requirements, but still provide minimum essential coverage.
- Employer Sponsored Plans (Including COBRA): Health Insurance coverage provided as part of employment through your employer sponsorship fulfill the criteria. Like the Individual Market plans, those plans that were grandfathered in prior to 2014 may not meet all the benefits requirements set by the ACA, but will still provide minimum essential coverage as it pertains to the individual mandate.
- Medicare Part A Coverage: Individuals who are eligible for Medicare, those 65 or older are automatically enrolled in Medicare Part A when applying for Medicare. Part A is the hospital insurance portion of Medicare and covers services like nursing care and hospital stays but may not cover the fees associated to other service providers like doctors. While having this sort of coverage qualifies as minimum essential coverage Medicare Part A does not address many of the other costs that are generally associated with healthcare such as laboratory, xray and other costs. Part A also does not cover prescription drugs and does not have an out of pocket maximum, which means that copays and coinsurance can add up over time.
- Medicare Advantage Plans: Medicare advantage plans are plans sold by private insurance companies contracted with Medicare to provide the healthcare benefits provided by Medicare Part A and B. This is also know as Medicare Part C and in many cases introduces a number of benefits that are not standard with the government provided program. These plans are designed similarly to the Individual and Employer sponsored plans with benefits like prescription drug coverage as well as caps on the out of pocket costs.
- Some Medicaid Coverage: Medicaid differs wildly from state to state in terms of the benefits that are covered. As a result Medicaid is some states provide Minimum essential coverage while others do not. In states where Medicaid coverage has been expanded to cover everyone under 138% of the federal poverty level, this type of coverage will suffice. Medicaid programs in other states will depend according to what is covered in the program. In particular those programs that cover only pregnancy related services would not provide Minimum Essential Coverage.
- Child Health Insurance Program (CHIP)
- Plans offered by the Department of Veterans Affairs (VA)
- Coverage Provided For Peace Corp Volunteers
- State High Risk Pool Plans
- Refugee Medical Assistance from the Administration for Children and Families
- Health Coverage offered by students of universities
Who Needs Minimum Essential Coverage?
The minimum essential coverage is tied to the individual mandate piece of Obamacare. It applies to all US citizens living in the United States and permanent residents or foreign nationals who are in the country and that would count as resident aliens for tax purposes. (For foreign residents see the IRS bulletin: http://www.irs.gov/taxtopics/tc851.html)
Anyone who fails to have minimum essential coverage during the calendar year can be subject to the shared responsibility fees, often referred to the penalties related to the individual mandate. The fees are based upon your household size and income with larger households and higher incomes assessed higher penalties. There are also a number of exemptions to the individual mandate that may preclude a household from needing to have minimum essential coverage. These exemptions can be found here in our article about the Individual Mandate and Penalties.