What is the minimum value standard for health insurance

The minimum value is a policy concept that applies to employer-sponsored health insurance, and premium tax credits are used to offset the cost of individually purchased health coverage plans. An individual isn't eligible for premium tax credits in the individual market if, is eligible for affordable, minimum value employer-sponsored health insurance. 

If the employer's health coverage offer doesn't provide adequate value, there are possibilities subjecting to financial penalties.

To provide minimum value, an employer-sponsored health plan has to pay for at least 60% of total covered healthcare costs, and it has to provide substantially all inpatient care and physician services.

IRS published Notice

The IRS published Notice 2014-69 in November 2014 added employee-sponsored plan requirements. According to it, the health care plan must have physician services and inpatient care coverage under minimum value. The main concern behind this release was that many large employees were offering plans that were not covering much but still fit under the umbrella of Minimum Value.

Small and large Group Market

Minimum value health plans providers in small Group markets have to include essential health benefits, inpatient and outpatient care, and these must have actuarial values of at least roughly 60% (with effective dates of January 2014 or later).

Minimum value health plans providers in large Group markets have to use a value calculator developed by HHS to make sure they are actually offering minimum value. 

Penalties By IRS

There are two different employer mandate penalties:

Penalties for employers that don't offer Minimum Value:  The first is for large companies who do not provide health insurance to at least 95 percent of their full-time employees, and at least one of those full-time employees purchases a plan via the exchange and qualifies for a premium subsidy.

Penalties for employers that offer Minimum Value: This is imposed on the companies providing coverage but is unaffordable and/or does not provide minimal value, and at least one of the full-time employees gets a premium subsidy from the exchange.

Minimum Value and Your Coverage

If your employer is offering the health coverage plan, chances are good that they are offering minimum value. 

In case you have not opted to get into the plan, and your employer offers coverage, chances are good that your employer does provide minimum value.

To comply with the Affordable Care Act.18, all Small group plans have to provide minimum value.

Large employers often want to avoid the employer mandate penalty and they typically offer a generous benefits package to attract and retain talented employees.

You should ask your employer about your health insurance benefits they're offering you with the bare minimum of benefits. In case it turns the other way, refusal is a choice and you can apply for coverage through your state's health insurance market , where you may be eligible for Premium subsidies.

Bottom-line

To be eligible for subsidies in the exchange, you need to make sure either your employer's plan is not providing minimum value or it is not affordable. if this is not the case you are not going to be eligible.

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Minimum essential coverage is health insurance coverage that satisfies the Affordable Care Act‘s shared responsibility provision (individual mandate). Although there is no longer a federal penalty for not having minimum essential coverage, the individual mandate still exists and the concept of minimum essential coverage is still important.

There are several types of qualifying events that only trigger special enrollment periods if the person already had minimum essential coverage prior to the qualifying event. And some states have imposed their own individual mandates, with penalties for residents who don’t maintain minimum essential coverage.

What plans are considered minimum essential coverage?

Plans do not have to be compliant with the ACA in other to be considered minimum essential coverage, as there are plans that predate ACA implementation that still count as having coverage under the law.

Plans that qualify as minimum essential coverage include employer-sponsored plans, individual major medical plans (including new ACA-compliant plans, grandfathered plans, and grandmothered plans), TRICARE, Medicare, most Medicaid plans, and CHIP, among others.

What plans are not considered minimum essential coverage?

Policies that are not major medical coverage and not regulated by the ACA do not count as minimum essential coverage. This includes discount plans, limited-benefit plans, critical illness plans, accident supplements, and dental/vision plans.

Indian Health Services coverage on its own is also not considered minimum essential coverage, although Native Americans have access to year-round enrollment in the exchange (with zero-cost-sharing if income doesn’t exceed 300 percent of the poverty level), and were exempt from the ACA’s individual mandate penalty during the years that it was assessed.

Health care sharing ministries are also not considered minimum essential coverage, although their members were also eligible for an exemption from the ACA’s individual mandate penalty.

But the concept of minimum essential coverage remains important for special enrollment period eligibility: If a person experiences a qualifying event that would trigger a special enrollment period (SEP) for ACA-compliant coverage but only if the person already had minimum essential coverage, the SEP would not be triggered if the person’s prior coverage was via a health care sharing ministry. The same is true for people whose previous coverage was a short-term plan, fixed-indemnity plan, discount plan, etc.

However, there is an exception for people who have pregnancy Medicaid, CHIP unborn child, or Medically Needy Medicaid. These are not considered minimum essential coverage, but they do meet the prior coverage requirements when a person is enrolling in a health plan during a special enrollment period that requires prior minimum essential coverage. And the termination of coverage under pregnancy Medicaid, CHIP unborn child, and Medically Needy Medicaid will trigger a loss-of-coverage special enrollment period (for the mother as well as the baby, in the case of CHIP unborn child coverage).

Minimum essential coverage versus minimum value

The terms minimum essential coverage and minimum value both stem from the ACA, and are sometimes conflated. But they mean two different things. Minimum essential coverage, as described above, is coverage that satisfies the ACA’s individual mandate.

Minimum value, on the other hand, is a measure of whether a plan offered by a large employer provides adequate coverage. In order to provide minimum value, an employer-sponsored plan must

• cover at least 60 percent of the average medical costs across a standard population (ie, similar to a bronze plan in the individual and small group market), and
• provide “substantial coverage” for inpatient care and physician treatment.

Large group plans (in most states, “large group” means 51+ employees) do not have to cover the ACA’s essential health benefits, and they do not have to fall into one of the ACA’s metal level ranges. The minimum value provision is instead used as the basic requirement that large employer plans must meet or exceed.

A large employer’s plan has to be both affordable and provide minimum value. If it’s not, and at least one employee obtains subsidized coverage in the exchange in lieu of the employer’s plan, the employer will be on the hook for the ACA’s employer mandate penalty.

Some employer-sponsored plans provide minimum essential coverage but are actually skimpy plans

Large employers are subject to the ACA’s employer mandate, which requires them to offer coverage to their full-time employees. The penalty for non-compliance is still in effect — only the individual mandate penalty was repealed. But there are two different penalty types under the employer mandate:

• One is for employers that simply don’t offer coverage to at least 95 percent of their full-time employees. In 2020, this penalty is calculated as $2,570 per full-time employee (minus the first 30 employees), and it’s triggered if even one full-time employee qualifies for a premium subsidy in the exchange (for 2021, HHS has proposed a penalty amount of $2,700).
• The other is for employers that do offer coverage, but it’s either unaffordable or does not provide minimum value. Unaffordable, in 2020, is defined as the employee’s share of the premium (for self-only coverage on the least-expensive plan the employer offers) being more than 9.78 percent of the employee’s household income (this will increase to 9.83 percent in 2021). Minimum value, as noted above, is defined as covering at least 60 percent of costs for a standard population and providing “substantial coverage” for inpatient and physician care. The penalty, in this case (in 2020), is the lesser of $3,860 per full-time employee receiving a subsidy in the exchange, OR $2,570 per full-time employee, minus the first 30 employees (for 2021, HHS has proposed adjusting these amounts to $4,060 and $2,700, respectively).

Depending on how many employees a company has, and how many of them end up seeking coverage in the exchange, the penalty can end up being significantly smaller if the employer offers coverage that doesn’t provide minimum value and/or that isn’t affordable for the employees (as opposed to not offering coverage at all).

Employer-sponsored coverage is, by default, considered minimum essential coverage. And small group health plans effective in 2014 or later are fully compliant with the ACA. But the waters can be murkier for large group plans. Most of them are robust, offering solid coverage that often exceeds the level of coverage people tend to purchase in the individual market.

But some large employers opt for skimpy plans that do not provide minimum value, knowing that they can dodge the (potentially larger) penalty they’d incur if they didn’t offer coverage at all. Employees who are offered these plans don’t always realize that the coverage is skimpy, and may not realize they’re eligible for a premium subsidy in the exchange (and if an employer’s coverage drops below the minimum value and/or affordability requirements mid-year, covered employees are eligible for a special enrollment period during which they can enroll in a plan through the exchange, with subsidies if they’re eligible based on income).

What is the affordability threshold for 2022?

What is the difference between minimum essential coverage and minimum value?

Does a high deductible health plan meet the minimum value standard?

What is considered minimum essential coverage under ACA?