With so many important provisions of the Affordable Care Act (ACA) kicking into high gear this year, many employers are still scrambling with the new compliance requirements. And there’s no doubt it can be a confusing alphabet soup of terms and jargon.
For example, all group health plans under the new law have to provide Minimum Essential Coverage (MEC) and Minimum Value. These two terms are often mistaken as being the same thing, but they’re not – and not knowing the difference could cost you.
What is Minimum Essential Coverage (MEC)?
Under the Employer Mandate, affected employers must provide health insurance plans that provide Minimum Essential Coverage for their employees. In general, a group health plan meets the MEC requirement if it has certain qualities, including:
- Coverage of ten essential benefits
- Guaranteed availability of coverage
- Guaranteed renewability of coverage
- Fair premiums
- 80/20 Medical Loss Ratio
- No dollar limits on essential benefits
What doesn’t count as MEC?
Coverage that provides only limited benefits – such as coverage only for vision or dental care, and Medicaid covering only certain benefits such as family planning, workers’ compensation, or disability – doesn’t meet theMEC requirements.
MEC plans allow employers to offer inexpensive group benefits to their employees that, if a preventive care benefit is added in, meet the guidelines for the individual mandate for employees; and help large employers avoid a stiff penalty for not offering medical coverage. MEC plans with an added preventive care benefit can run around $100 per employee per month, much less expensive than a fully-insured plan. When you’re employing hundreds or thousands of employees, the cost of health insurance can be overwhelming, especially when the average cost is $256 per individual ($315 in California). Having the ability to use a MEC plan with a preventive care benefit tied in just makes financial sense.
But beware – not every group benefits plan that provides MEC meets the Minimum Value requirements.
What is Minimum Value?
To meet the Minimum Value requirement, a group benefits plan must pay at least 60 percent of the cost of covered medical services (considering deductibles, copays, and coinsurance). That means they must be equal to a Bronze plan sold on the Health Insurance Marketplace and have an actuarial value of at least 60 percent.
You could be offering a MEC plan that meets ACA guidelines for offering coverage and avoids the $2,000 per employee fine, but doesn’t meet the Minimum Value requirement. If that’s the case, you’re exposing yourself to a fine of $3,000 for every employee who buys health insurance through their state or federal exchange and receives a subsidy. And those penalties add up fast! Group benefits that don’t meet the Minimum Value requirements include:
- Retiree Health Reimbursement Arrangements (HRAs)
- Grandfathered plans (if they have a high deductible)
- “Skinny” or bare-bones plans that large employers might offer to avoid certain Employer Mandate penalties
Know the law
Your best compliance tool is knowledge, so be sure to take advantage of government resources such as the IRS and HHS websites to stay up to date on the laws. For example, you can determine if your health plans meet the Minimum Value requirement by using the Minimum Value calculator developed by the Department of Health & Human Services (HHS). And you can learn more about Minimum Essential Coverage at the Federal Register website and the ObamaCare Facts website.
Need help sorting it all out and keeping your group benefits compliant? Make it simple – contact the experts at BeaconPath.