The phrase “minimum essential coverage” (MEC) became part of our health insurance vocabulary along with the Affordable Care Act (ACA, also referred to as “Obamacare”).
Minimum essential coverage is a way to identify which types of health insurance policies fulfill the ACA’s individual mandate.
Between 2014 and 2019, if you went more than three months without ACA-qualifying “minimum essential coverage”, you owed a tax penalty.
The individual mandate tax was eliminated in 2017, and went into effect beginning January 1, 2019, meaning that from that point on, if you do not carry “minimum essential coverage” you will not owe a federal tax penalty. However, some states are enacting state-level legislation that could restore penalties for not maintaining MEC.
Even with the tax penalty gone, any individual major medical insurance policy that you buy today, in the private marketplace or directly from an insurance company, must meet the requirements of “minimum essential coverage” and be considered a “qualified health plan.”
What Are Qualified Health Plans?
Qualified health plans:
- Are certified by the Health Insurance Marketplace
- Provide the essential health benefits
- Follow established limits on cost-sharing (deductibles, copay, coinsurance and out-of-pocket limits)
- Meet other requirements under the ACA.
Qualified health plans are broken down into four coverage levels, identified by metal tiers:
- A Bronze plan must cover 60% of expected costs for the average individual
- A Silver plan must cover 70% of expected costs
- A Gold plan must cover 80% of expected costs
- A Platinum plan must cover 90% of expected costs
The “qualified health plan” distinction is important because there are other types of individual health insurance you can purchase, like hospital indemnity plans or short term health plans, that are not considered minimum essential coverage and are not governed by the ACA.
These plans typically have fewer benefits, less coverage and more exclusions than MEC health plans.
What Counts as Minimum Essential Coverage?
Coverage does not have to be a qualified health plan to be considered minimum essential coverage. For instance, grandmothered and grandfathered policies, state-run high-risk pools, and Medicare and Medicaid policies count as minimum essential coverage, but may not include all the essential health benefits needed to be considered a qualified health plan as defined by the ACA.
Plans that qualify as minimum essential coverage fall into three general categories:
Employer-sponsored coverage includes coverage offered in the small or large group market within a state, and coverage provided by a government employer (such as the Federal Employees Health Benefits program).
Examples of employer-sponsored coverage includes:
- A grandfathered or grandmothered health plan offered in a group market
- A self-insured health plan for employees
- COBRA coverage
- Retiree coverage
- Coverage under an expatriate health plan (a group health plan for individuals and any covered dependent who reside outside of their home country for at least six months of the plan year)
- Department of Defense NAF Health Benefits Program (Department of Defense nonappropriated fund (NAF) employees work in military exchanges and morale, welfare and recreation programs.)
Individual market coverage
Individual market coverage includes:
- Health insurance you purchase directly from an insurance company
- Health insurance you purchase through the Marketplace
- Health insurance provided through a student health plan
- Catastrophic coverage
- Coverage under an expatriate health plan for non-employees such as students and missionaries
- Grandmothered policies (plans purchased after the ACA was signed into law, but before the bulk of the ACA’s provisions took effect)
- Grandfathered policies (plans already in effect when the ACA was signed into law and that have not been significantly changed since then)
Coverage under government-sponsored programs
Government-sponsored program coverage includes:
- Medicare Part A coverage
- Medicare Advantage plans
- Most Medicaid coverage. Medicaid programs that provide limited benefits (including Pregnancy Medicaid, Medically Needy Medicaid, and CHIP Unborn Child) generally don’t qualify as minimum essential coverage.
- Children’s Health Insurance Program (CHIP) coverage
- Most types of TRICARE (military) coverage
- Comprehensive health care programs offered by the Department of Veterans Affairs
- Health coverage provided to Peace Corps volunteers
- Refugee Medical Assistance
- Coverage through a Basic Health Program (BHP) standard health plan
Other coverage includes:
- Coverage under a group health plan provided through insurance regulated by a foreign government if a covered individual is physically absent from the United States for at least one day during the month, or a covered individual is physically present in the United States for a full month and coverage provides health benefits within the United States while the individual is on expatriate status
- Certain coverage provided to business owners who aren’t employees
- Coverage recognized by Department of Health and Human Services as minimum essential coverage
What doesn’t count as MEC health insurance?
MEC health insurance doesn’t include coverage that isn’t considered comprehensive or consists solely of “excepted benefits” such as short term medical insurance, critical illness or hospital indemnity insurance.
Other types of coverage that do not qualify include:
- Stand-alone vision and dental plans
- Workers’ compensation
- Coverage only for a specific disease or condition (like “cancer” insurance)
- Products that provide discounted medical services
How to Get an Individual MEC Health Insurance Plan
If you do not have minimum essential coverage and wish to get it through the public health insurance marketplace, you must do so either during the annual open enrollment period (Nov – Dec) or during a special enrollment period if you qualify.
Do You Qualify for an Affordable Care Act Subsidy?
Use the ACA Subsidy Calculator to find out if you can get financial help if you enroll in ACA-qualifying major medical insurance. Learn more about subsidies.
If you are unsure whether or not your policy qualifies as minimum essential coverage, contact your insurance company or your insurance agent.
Do you need insurance now? Find out if you can enroll in ACA-qualifying major medical insurance now and, if not, what kind of insurance you can get until you’re able to obtain MEC coverage.
You can also work with an insurance professional that can help you understand your options and answer your questions. Call (888) 855-6837 to speak with a licensed agent.
Supplementing Your MEC Health Plan
If you have an ACA-qualifying major medical plan, whether through an employer or the private marketplace, you may also have a high deductible. There are supplemental insurance products available that can help with deductibles, higher cost out-of-network medical care and even other routine non-medical expenses like transportation, childcare, rent and groceries.
Hospital indemnity insurance can supplement your major medical plan by providing additional fixed indemnity benefits that pay out on a per period or per incident basis. Hospital insurance does not coordinate benefits with other insurance plans and does not count as qualifying minimum essential coverage. Learn more about hospital indemnity insurance.
Gap health insurance pays a lump sum benefit when a covered accident or illness occurs. This benefit can then be used towards your major medical deductible payment or for other expenses like groceries, transportation and housing. Learn more about gap health insurance.
Dental insurance provides benefits that help pay for a range of dental services that your major medical plan does not cover, from preventive to major care. Learn more about dental insurance.
Telemedicine includes access to virtual health consultations with licensed physicians 24/7/365. Telemedicine is not insurance. Learn more about telemedicine.
If you aren’t able to enroll in an ACA-qualifying MEC plan right now, consider obtaining temporary health insurance to help with the high out-of-pocket costs of being hospitalized or visiting the emergency room.
Short Term Health Insurance
These plans typically have lower premiums than major medical because they provide less coverage.
However, they are typically highly customizable so you can choose the benefits you need, and you can apply anytime as these plans are not subject to the annual open enrollment period.
The best way to compare costs and plans available to you is to get a quote (it just takes a minute).
Summary + Next Steps
We covered a lot of material in this blog post. Here are some of the key points to remember:
Minimum essential coverage refers to any insurance plan that fulfills the individual mandate that everyone obtain health insurance coverage (the federal penalty for which is now repealed).
In the individual health insurance market (i.e., non-group and non-government), any policy being marketed as “major medical insurance” is considered minimum essential coverage and a qualified health plan.
Even though you won’t experience a federal tax penalty for not having MEC, having ACA-qualifying coverage is the best way to ensure you have access to the most comprehensive health benefits.
You have to qualify for a special enrollment period to access individual major medical coverage when it’s not the annual open enrollment period. If you don’t qualify, you can still obtain a non-ACA short term health policy until next year’s open enrollment or you are able to get coverage through an employer’s group plan.
Still have questions? Call (888) 855-6837 to speak to a licensed agent.