Minimum Essential Coverage (MEC) and Essential Health Benefits and Minimum Value

Posted by BAS - 02 July, 2015

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As employers are preparing for their health care reform compliance filings due in early 2016, some terms may cause confusion. Minimum essential coverage, minimum value, and essential health benefits are some of those terms.

1. What is minimum essential coverage?

MEC is defined as any “eligible employer-sponsored plan” offered by an employer to an employee that is (1) a governmental plan, or (2) any other plan or coverage offered in a state’s small or large group market.

An individual cannot get a premium tax credit to purchase coverage through the Exchange if the individual is offered minimum essential coverage.

2. What does minimum value mean?

Under health care reform, health coverage must provide minimum value. It is an actuarial calculation. A plan provides minimum value if the plan pays at least 60% of the costs of benefits for a standard population. The IRS has a minimum value calculator. By entering certain information about the plan, such as deductibles and co-pays, into the calculator employers can get a determination as to whether the plan provides minimum value. 

3. What are essential health benefits? 

Essential health benefits is the term used to describe the benefits that qualified health plans are required to cover. Non-grandfathered plans in the small group market (both inside and outside of the Exchanges) must offer essential health benefits. Grandfathered plans, self-insured group health plans, and health insurance coverage offered in the large group market are not required to offer essential health benefits. 

4. What is the difference between essential health benefits and minimum essential coverage and minimum value coverage? 

A large employer must offer a minimum essential coverage plan that meets minimum value. 

Minimum essential coverage is the term used to describe the coverage required to fulfill the individual mandate, and that employers may need to offer to avoid penalties. Large employers may be subject to a penalty for (1) failing to offer minimum essential health coverage for all full-time employees (and their dependents)—the subsection (a) penalty; or (2) offering eligible employer-sponsored coverage that is not “affordable” (or does not offer “minimum value” (the plan's share of the total allowed cost of benefits is not at least 60%)—the subsection (b) penalty. A tax penalty can be assessed against an individual who does not have minimum essential coverage. 

It is helpful for employers to understand the many new concepts and terms under health care reform.


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