What is Minimum Essential Coverage?
Minimum essential coverage is the term used to describe the minimum benefits set forth by the Affordable Care Act (ACA) that health insurance plans are required to meet. These plans that satisfy ACA requirements are referred to as qualifying health plans or QHPs.All qualified health plans must be approved by the Health Insurance Marketplace, offer ten essential benefits, follow federal guidelines regarding cost, and cover pre-existing conditions.
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Making Sure Your Basic Health Needs Are Covered
Passed in 2010, the ACA was designed to, amongst other things, make health insurance more accessible and affordable. One of the main goals of the ACA was to ensure that individuals’ basic health needs were met. To do this, the ACA provided a structure that health plans must adhere to.
Since the passing of the ACA to today, there have been many changes and provisions. In 2014, the Health Insurance Marketplace was established as a way for individuals to purchase a qualifying health plan if their employer did not offer health coverage.
Originally, if an individual did not maintain minimum essential coverage, they would face a tax penalty. However, the tax penalty ended in 2019, though some states, such as California, Massachusetts, New Jersey, Rhode Island, and Washington D.C., may fine their residents for not maintaining minimum essential coverage.
How Does Minimum Essential Coverage Work?
To be considered minimum essential coverage, a qualifying health plan must be approved by the Health Insurance Marketplace and meet federal guidelines regarding premiums, deductibles, copays, and coinsurance. A plan must have an actuarial value of 60% or more. This means that the plan will cover 60% of an individual’s medical costs for the plan year, and the policyholder will cover the remaining 40%. A QHP (Qualified Health Plan) must also provide coverage for pre-existing conditions and ten essential health benefits listed by the ACA.
What is Included — The 10 Minimum Essential Health Benefits
One main goal of the ACA is to increase the quality of coverage provided to policyholders, which is why a plan must offer ten minimum essential benefits and cover pre-existing conditions. Although more benefits may be offered, if any of the ten minimum essential health benefits are missing from a plan, the plan will not meet federal requirements. To be a QHP, the plan must offer the following:
Ambulatory Services (Outpatient Care)
Ambulatory services, or outpatient care, refers to services provided outside of a hospital setting. Not all medical situations call for a trip to the hospital. In some cases, a patient may be seen in a clinic or an urgent care facility. These are services that must be covered for a plan to meet the minimum essential coverage requirements. This also includes coverage for physical therapy, occupational therapy, and speech therapy.
In the event of an emergency, a policyholder may need to seek care at an emergency room. Coverage must be offered for emergency services, and the plan cannot charge more if the emergency room is out-of-network. Emergency services also include emergency transportation such as ambulance or medical flight services. It is important to note that a hospital cannot refuse emergency care even if the patient has no insurance.
A plan must include coverage for hospital stays, inpatient care, and surgeries. Although the coverage may be limited to a set number of days, hospitalization coverage must be offered.
Pregnancy, Maternity, and Newborn Care
Prior to the ACA, most health plans excluded maternity and pregnancy care. However, in 2014, it was mandated that all QHPs must include coverage for pregnancy and maternity care along with newborn care. This includes care for the mother during pregnancy, labor and delivery, and shortly after delivery. This also includes coverage for all newborns.
Mental Health and Substance Use Support
When it comes to mental health and substance abuse support, prior to the ACA, many plans lacked coverage. Now, a plan must include coverage for both mental health and substance abuse support that includes counseling, behavioral health services, and psychotherapy.
With the passing of the ACA, came mandatory coverage for prescription drugs. The ACA provides a list of approved prescription drugs in different categories. One medication from each category must be covered for the plan to provide minimum essential coverage.
Laboratory services must also be offered for a plan to be considered a QHP. Laboratory services may include testing and bloodwork for both illnesses and preventative services.
Preventative, Wellness, and Chronic Disease Services
An important part of the ACA was to provide preventative coverage to insureds. Mandated is included for services such as checkups, physicals, and routine bloodwork. Chronic disease services, such as medical care for diabetes and cancer, must also be included.
When it comes to healthcare services for children up to the age of 19, a plan must offer coverage for many services such as costs associated with illnesses, accidents, and preventative measures. Well-child visits, immunizations, and preventative testing are also included. Unlike adult plans, pediatric services extend to dental and vision care.
What is Not Included
Although the ACA required that many more services be included in minimum coverage, not all services are covered. This means that a plan may meet the minimum essential requirements, but still deny coverage for other services that are not included, such as:
- Elective or cosmetic procedures
- Dental services for adults
- Vision services for adults
- Nursing home care
- Long-term care
Types of Plans That Meet ACA Minimum Essential Coverage
When looking for health coverage, it is important to know what plans are acceptable. While most common types of plans will often meet the ACA requirements, a full list of plans that meet the minimum essential requirements can be found on the Health Insurance Marketplace.
Individual, Family, or Employer Plans
Individual and family plans offered through employers, including COBRA, are ACA-compliant. Businesses that have 50 or more employees are required to offer health insurance coverage; this plan must also be in accordance with ACA requirements. Often, the company will offer coverage for the employee’s spouse and dependents as well. Those whose job does not offer health insurance can visit the Health Insurance Marketplace to purchase coverage. All plans offered on the marketplace offer minimum essential coverage.
State or Federal Plan
Plans that are offered through state and federal agencies are all compliant with ACA requirements. Both Medicare Part A and most Medicaid plans offer minimum essential coverage.
The Children’s Health Insurance Program (CHIP) plans all meet minimum essential coverage, and most CHIP plans include dental and vision coverage, which is a requirement of the ACA for pediatric care. If not included, the dental and vision coverage would still be offered via CHIPs through a separate plan.
Some plans offered to veterans through the Veteran’s Administration also meet ACA standards.
Different Levels of Plans
All plans offered on the Health Insurance Marketplace meet ACA requirements. To meet ACA requirements a plan must cover at least 60% of the medical costs that an insured acquires during a plan year. The Marketplace offers different levels of coverage, also known as Metal tiers, and a shopper can choose what plan is best for them.
The base plan offered on the Marketplace is the Bronze tier. This plan covers 60% of medical costs, while the policyholder covers the remaining 40% out of pocket. It also offers the lowest premiums, but the policyholder will be paying more out of pocket than any other Metal plan. This plan is good for those who do not go to the doctor often or can afford a larger out-of-pocket expense.
The Silver plan is the next tier of coverage and is the most purchased plan. The Silver plan covers 70% of medical costs and offers lower deductibles than the Bronze plan. The premiums will be higher than that of the Bronze plan, but lower than the top two Metal tiers. This plan is good for those who can afford to pay more per month and may visit the doctor on a more regular basis.
The next Metal tier plan is Gold. The Gold plan covers 80% of medical costs and offers lower deductibles than both the Silver and Bronze plan. This plan is good for someone who may need frequent access to medical care. It also offers the second-highest premiums.
The Platinum plan is the highest level plan offered on the Marketplace. It covers 90% of medical costs and has the lowest deductibles and copays of any plan. This plan is good for those who can afford a higher payment and wants extensive coverage.
Types of Plans That Do Not Meet ACA Minimum Essential Coverage
Though most major medical insurance plans are going to meet the ACA standards, there are some plans that do not qualify. For example, dental and vision plans are not QHPs and will not meet the minimum essential coverage requirement. Plans such as short-term health policies, supplemental policies, and some Medicaid plans are also not ACA-compliant.
How Much Does Minimum Essential Coverage Cost?
One main goal of the ACA was to provide affordable healthcare. However, the cost is still a factor when shopping for QHPs.
For example, a 40-year-old purchasing a Silver plan may expect to pay an average of $470 per month, however, for a couple of the same age, the same plan may be an average of $940 per month. When adding on a child, that same plan may increase by an average of $277 per month.
It’s important to note that these average costs do not include any credits or subsidies that may be available to help offset the price.
Minimum Essential Coverage Penalties
At its introduction, the ACA required individuals to maintain minimum essential coverage or face a tax penalty. However, in 2019, the tax penalty was lifted. Although there is no federal penalty, some states may fine their residents for failing to carry a QHP. California, Massachusetts, New Jersey, Rhode Island, and Washington D.C., all have penalties if residents do not maintain minimum essential coverage.
If a resident of California fails to maintain minimum essential coverage, they may face a penalty of 2.5% of their household income. The average penalty is $695 per adult and $375 per child. The penalty is capped at the average yearly premium for the Bronze plan.
In Massachusetts, a resident may face a penalty of up to 50% of the monthly payment for the Bronze plan. For example, if the Bronze premium would be $250 per month, the resident can be fined up to $125 a month or $1,500 a year.
New Jersey’s penalty for not carrying minimum essential coverage is very similar to that of California. A noninsured may face a penalty of either $695 per adult and $347 per child or 2.5% of the household income, whichever is higher.
In Rhode Island, the penalty is $695 per adult or 2.5% of the household income, whichever is greater. The penalty is capped at the average cost of the Bronze plan for a Rhode Island resident. The penalty may increase annually to cover inflation.
The penalty in Washington, D.C. is the same as in Rhode Island except that the penalty does not increase with inflation.
In hopes to provide more affordable healthcare, the ACA offers subsidies to help offset the price of coverage purchased from the Marketplace. The subsidy offers advanced tax credits to insureds with net incomes between 100%-400% of the Federal Poverty Line. Subsidies are available to residents in every state and are based on the price of the Silver Plan.
89% of those enrolled in a plan through the Marketplace receive a subsidy. It is important to note that an individual cannot receive a subsidy for any plan outside the Marketplace; they also cannot receive the subsidy if their employer offers minimum essential coverage.
How to Get Minimum Essential Coverage
Purchasing minimum essential coverage may be done in many ways. An individual or family that is eligible for Medicaid or CHIP coverage may visit their local Department of Health and Human Resources (DHHR) office or apply online for coverage. An employee at a company that provides coverage may be able to enroll in an employer-sponsored plan.
It is important to note that there are only specific times a year when you can enroll in a new health insurance plan. This can be when the coverage first becomes available upon joining a company, during open enrollment, or during following a qualifying life event such as a marriage, divorce, or birth of a child. If an insured does not qualify for any state or federal/program, and their employer does not offer health insurance, they may visit the online Health Insurance Marketplace to purchase a qualifying plan.
Open enrollment for the Marketplace is from November 1-December 15 annually, and coverage begins the following year. For example, if insurance is purchased during the open enrollment period on December 1, 2023, the policy will take effect on January 1, 2024. If a shopper misses the open enrollment period, they can only enroll if they have a qualifying life event or if they become eligible for a state-funded program.
All in All
The Affordable Care Act was designed to ensure individuals and families were provided with minimum essential coverage at an affordable cost. The originators of the ACA wanted to guarantee that every qualifying health plan provided the same ten minimum essential benefits. By doing this, they set a requirement that all qualifying health plans had to meet. This guarantees all individuals and families are provided with a bare minimum of coverage that exceeded the bare minimum that health insurance policies were required to offer in the past.