Sorting Out the Minimums and Essentials of ACA

By: Lois Mathis-Gleason, CEBS

The Affordable Care Act changed our language as well as our health care system. Some of ACA’s key terms and phrases sound remarkably similar but have different meanings. Confused? We’ll help you sort out minimum essential coverage, minimum value, and essential health benefits

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Minimum Essential Coverage
Starting in 2014, individuals must either maintain minimum essential coverage or pay an individual shared responsibility penalty under the Affordable Care Act (ACA).

Minimum essential coverage includes:

  • ​​​​Government-sponsored programs (Medicare Part A, Medicaid, CHIP, TRICARE®​​​, etc.)
  • Employer-sponsored plans
  • Plans in the individual market
  • Grandfathered health plans
  • Refugee medical assistance
  • Medicare Advantage Plans
  • State high-risk pools (for plan or policy years beginning on or before December 31, 2014)
  • Self-insured student health plans (for plan or policy years beginning on or before December 31, 2014)

The ACA also provides that beginning in 2015, applicable large employers must either provide minimum essential coverage that is affordable and of minimum value or pay penalties. Minimum essential coverage under an eligible employer-sponsored plan includes governmental plans or any plan offered in the small- or large-group market within a state.

Minimum Value
Starting in 2015, applicable large employers must pay penalties if they do not provide minimum essential coverage that is affordable and of minimum value.

Under Tax Code Section 36B(c)(2)(C)(ii), a health plan does not provide “minimum value” if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of the costs.  The minimum value  percentage is determined by dividing the cost of certain benefits the plan would pay for a standard population by the total cost of certain benefits for the standard population, including amounts the plan pays and amounts the employee pays through cost sharing, and then converting the result to a percentage.

Any of these methods can be used to determine if a plan offers minimum value:

  • ​Minimum value calculator
  • Safe Harbor checklists to be provided by the Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS), employers will be able to compare to their plans’ coverage
  • Actuarial certification from a member of the American Academy of Actuaries
  • For small plans, the plan offers minimum value if it meets requirements for any of the levels of metal coverage (bronze, silver, gold or platinum).

Essential Health Benefits
Nongrandfathered insured plans in the individual and small employer markets are required to offer essential health benefits beginning January 1, 2014.

Large employer plans are not required by the ACA to offer essential health benefits. However, most already do. Any essential health benefits that are offered must not be subject to annual and lifetime dollar-based limits.  In addition, starting in 2014, the ACA imposes cost-sharing limits on in-network essential health benefits in nongrandfathered health plans. 

Essential health benefits include items and services in the following ten benefit categories:

  1. ​Ambulatory patient services
  2. Emergency services
  3. Hospitalization
  4. Maternity and newborn care
  5. Mental health and substance use disorder services including behavioral health treatment
  6. Prescription drugs
  7. Rehabilitative and habilitative services and devices
  8. Laboratory services
  9. Preventive and wellness services and chronic disease management
  10. Pediatric services, including oral and vision care

HHS has not adopted a uniform definition of essential health benefits. Instead, each state has an essential health benefit​ “benchmark plan,” so the exact definition of essential health benefits varies from state to state.

These three terms are just one part of ACA that may leave you with more questions than answers. The International Foundation provides the news updates and resources to help you make sense of it all. For more ACA clarification and implementation guidance, check in regularly at ACA Central and AC​A Unive​rsity​​.​

The resources referenced were selected by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.

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