Essential Health Benefits, Minimum Essential Coverage, and Minimum Value…Oh My!
Essential Health Benefits, Minimum Essential Coverage, and Minimum Value…Oh My!October 27, 2015
Catrina Reyes, J.D., M.P.A., Policy Analyst and Compliance Manager
The Affordable Care Act (ACA) introduced a number of new requirements and along with it a number of new terms that appear similar, which makes complying with the various requirements confusing. A few of these terms are Essential Health Benefits (EHBs), Minimum Essential Coverage (MEC), and Minimum Value (MV). With hope, after reading this, you’ll better be able to distinguish between these terms.
Essential Health Benefits (EHBs) is the term used to describe the benefits that non-grandfathered health plans in the individual and small group markets are required to cover. The benefits must include at least the following general categories and the items and services covered within the 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, and (10) pediatric services, including oral and vision care. Large group health plans are not required to cover the EHBs. Although, plans that fail to provide substantial coverage for in-patient hospitalization and/or physician services do not provide MV (see below for what this means).
Minimum Essential Coverage (MEC) is a different concept from EHBs. It is the term used to describe the coverage individuals are required to have to comply with the Individual Mandate and the coverage Applicable Large Employers are required to offer to avoid one of the Large Employer Mandate penalties. Even if a health plan does not provide EHBs, the coverage will still likely meet MEC. MEC means any of the following: (1) government sponsored programs, such as Medicare and Medicaid, (2) coverage under an eligible employer-sponsored plan, (3) plans in the individual market, (4) grandfathered health plans, and (5) other health benefits coverage that the U.S. Department of Health and Human Services recognizes, such as a state health benefits risk pool. A plan consisting solely of Excepted Benefits is not MEC.
Minimum Value (MV) is a higher threshold than MEC. MV means the plan’s share of the total allowed costs of benefits is at least 60% (i.e. 60% actuarial value). This means the enrollees covered pay (via deductibles, coinsurance, copayments, and other out-of-pocket expenses) on average 40% of the covered benefits. These costs are determined based on a standard population and do not predict the out-of-pocket costs for any one individual. Even if the coverage offered by an Applicable Large Employers does not meet MV, it will still likely meet MEC, which means the employer avoids one of the Large Employer Mandate penalties and employees who have such coverage will not be subject to the Individual Mandate penalty. To avoid both of the Large Employer Mandate penalties, Applicable Large Employers must offer MEC, that is MV and affordable, to substantially all of its full-time employees and their dependents (does not include spouses).
To learn more about the Large Employer Mandate, download Claremont’s essential ‘Play or Pay’ guides.