Written by Susan Grassli, J.D.
On October 31, 2013 regulators issued guidance regarding the process through which certain types of coverage may apply to the U.S Department of Health and Human Services (HHS) to be recognized as Minimum Essential Coverage (MEC). Plans that might need to apply to be recognized as MEC are those that are either not statutorily specified or not designated through regulation as MEC. For most employers, no action is required because most plans will not need to apply to be recognized as MEC. The list below details the many types of plans that have already been specified (by the Affordable Care Act or by regulation) as MEC. If you believe you have a plan that may not be Minimum Essential Coverage, please continue reading
Whether or not a particular plan qualifies as MEC has ramifications for both individuals (starting in 2014) and for large employers (starting in 2015).
Effective January 1, 2014, the Individual Mandate requires most individuals to obtain and maintain Minimum Essential Coverage for themselves and their dependents or pay a tax. If individuals obtain Minimum Essential Coverage through their employer’s plan, through the exchange or through some other means, they will NOT pay an Individual Mandate tax.
Effective January 1, 2015, the Employer Mandate (Employer Shared Responsibility) will create potential penalties for large employers if they do not offer to all ( 95%) of their full-time employees coverage that is at least Minimum Essential Coverage. To avoid all Employer Mandate penalties, large employers must offer coverage that is not only Minimum Essential Coverage but is also Affordable and also provides Minimum Value.
Minimum Essential Coverage is often confused with Essential Health Benefits or Minimum Value, but they are completely separate terms. For information on the differences between these terms, please see our January 2014 article entitled: Understanding the Difference between Minimum Essential Coverage, Essential Health Benefits, Minimum Value and Actuarial Value.
Most plans offered by small and large employers meet Minimum Essential Coverage. The few exceptions include bare bones plans often referred to as “skinny plans” (regulators have suggested that they will issue regulations on whether “skinny” plans meet MEC but no regulations yet to date) and plans that consist mostly of “excepted benefits” (for more information on Excepted Benefits, see our December 2013 article entitled: Excepted Benefits: Newly Proposed Rule Expands Definition and our August 2012 article entitled: What are “Excepted”Benefits?).
Plans Already Designated as Minimum Essential Coverage
The types of coverage that are designated by statute (the ACA) as minimum essential coverage:
• Government sponsored programs
o Medicare Part A
• “Eligible” Employer-sponsored plans
o Offered by employer to employee that is a Governmental plan
o Offered by employer to employee that is in the small or large group market
o Offered by employer to employee that is self-insured
o Offered by employer under COBRA
o Offered by employer to retiree
o Multiemployer collectively bargained plan
o Single employer collectively bargained plan
o Offered by professional employer organization (PEO)
o Offered by leasing Company
• Plans in the individual market
• Grandfathered health plans
The types of coverage that are designated by regulation as minimum essential coverage:
• Refugee Medical Assistance supported by the Administration for Children and Families
• Medicare Advantage plans
The types of coverage that are considered minimum essential coverage for a one year transitional period in 2014:
• 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).
Which Plans Need to Apply for MEC and New Regulations on How to Apply
Plans that need to apply for recognition as MEC are:
• Those plans that are not designated by statute or designated by regulation as Minimum Essential Coverage.
• For plan or policy years beginning on or after January 1, 2015, State High-Risk Pools and Self-insured Student Health Plans will need to apply for a MEC designations.
• “Skinny Plans” appear to NOT be considered MEC at present, and therefore also must seek recognition as MEC; however, regulators have suggested they will issue future guidance on “skinny plans” and on whether this type of bare bones coverage would qualify as minimum essential coverage. (See DOL FAQs issued January 9, 2014)
The regulations issued on October 31, 2013 identify the process through which the above types of coverage may apply to the United States Department of Health and Human Services (HHS) to be recognized as minimum essential coverage.
Plans that need to be recognized as Minimum Essential Coverage must meet substantially all of the requirements of the provisions of Title I of the Affordable Care Act that apply to non-grandfathered health plans in the individual market. Specifically, these plans must certify that the plan complies with the “substantially all” test and “by its own terms” test.
Substantially All Test: the applicant must certify that the plan complies with the “substantially all” the following ACA provisions:
• PHS Act § 2701: Fair health insurance premiums (Only the prohibition on rating based on gender)
• PHS Act § 2704: Prohibition on pre-existing condition exclusions
• PHS Act § 2705: Prohibition against discrimination based on health status; Genetic Information Nondiscrimination Act
• PHS Act § 2707(a): Provision of essential health benefits
• PHS Act § 2711: Prohibition against lifetime and annual limits
• PHS Act § 2712: Prohibition against rescissions
• PHS Act§ 2713: Coverage of preventive health services
• PHS Act § 2714: Extension of dependent coverage
• PHS Act § 2715: Summary of benefits in coverage. Plan should begin providing the summary of benefits and coverage as soon as practicable, but no later than January 1, 2015.
• PHS Act § 2719: Appeals Process
• PHS Act § 2719A: Patient Protections
• PHS Act § 2725: Newborns’ and Mothers’ Health Protection Act
• PHS Act § 2726: Mental Health Parity and Addiction Equity Act
• ACA § 1302(d)(1): Actuarial value no less than 60 percent.
• PHS Act § 2727: Women’s Health and Cancer Rights Act
“By Its Own Terms” Test: to the extent that requirements in Title I would directly apply to the coverage by their own terms, HHS will evaluate the plan or policy to see if it complies with these requirements as well. Such other requirements may include, for example:
• PHS Act § 2702 (guarantee availability)
• PHS Act § 2703 (guaranteed renewability)
• PHS Act § 2706 (Non-discrimination against providers in health care)
• PHS Act § 2709 (Coverage for individuals participating in clinical trials)
Note: HHS suggested that there may be situations where recognition of a plan as minimum essential coverage is reasonable and appropriate even where the plan does not meet the ‘substantially all’ standard. Accordingly, plans that do not meet all of the foregoing requirements will be evaluated on a case-by-case basis.
To see the actual application process and steps for getting a plan recognized as Minimum Essential Coverage, please see our December 2013 article entitled: How to Apply to be Recognized as Minimum Essential Coverage. To learn the difference between Minimum Essential Coverage, Essential Health Benefits, Minimum Value, and Actuarial Value, please see our December 2013 article entitled: Understanding the Difference Between Minimum Essential Coverage, Essential Health Benefits, Minimum Value, and Actuarial Value.