Minimum Essential Coverage – ACA
According to the IRS:
Under the Affordable Care Act’s employer shared responsibility provisions, certain employers (called Applicable Large Employers or ALEs) must either offer minimum essential coverage that provides minimum value to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. Additionally, the employee-only coverage must be affordable. Dependent coverage does not need to meet that standard.
Minimum Essential Coverage
Qualifying health insurance coverage, called minimum essential coverage, includes coverage under various, but not all, types of health care coverage plans. The majority of coverage that people have today counts as minimum essential coverage.
For purposes of reporting by applicable large employers, minimum essential coverage means coverage under an employer-sponsored plan. Minimum essential coverage does not include plans offering only indemnity insurance, life insurance, dental, or vision coverage.
Minimum essential coverage does not include any health plan under the Employment Retirement Income Security Act, which includes both insured and self-insured health plans. Employer plans that only cover “excepted benefits” are not considered minimum essential coverage. These include:
· Stand-alone vision and dental insurance
· Workers’ compensation
· Accident or disability coverage
· Medicaid plans that provide limited coverage such as only family planning services or only treatment of emergency medical conditions.
An employer-sponsored plan provides minimum value if it covers at least 60% of the total allowed cost. See Notice 2014-69 for additional guidance regarding whether an employer-sponsored plan provides minimum value coverage to substantially cover in-patient hospitalization and physician services. Employers can consult with their insurance provider or use a minimum value calculator developed by the Department Health and Human Services to determine if a plan with standard features provides minimum value. Plans with nonstandard features are required to obtain an actuarial certification for the nonstandard features.
Affordability and Safe Harbors
“Affordable coverage” for 2016 filing was defined as 9.5% of an employee’s income, though that percentage may be adjusted each year. Because total household income is frequently unknown, an employer may choose one of three safe harbors to determine affordability for the purposes of the employer shared responsibility provisions (ESRP).
These safe harbor methods are an employee’s rate of pay, Form W-2 wages, or the Federal Poverty Level. These safe harbors do not affect an employee’s eligibility for the premium tax credit. For more information about the safe harbors, see the IRS Question and Answer page and section 4980H of the ESRP regulations.
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