The Importance of Minimum Essential Coverage in the Affordable Care Act

Businesses of all sizes should understand the laws under the Affordable Care Act (ACA) to avoid costly penalties and ensure they are helping their employees get the quality insurance coverage they deserve. A particularly important consideration when choosing employer health plans is offering options that meet minimum essential coverage (MEC) standards.

We are breaking down the ACA, considering specific MEC considerations, and explaining why it is so crucial for employers to abide by these guidelines so your business can be prepared to comply with the regulations that apply to your specific operation.

What is the Affordable Care Act?

President Barack Obama signed the Affordable Care Act into law on March 23, 2010. The ACA, also known as Obamacare and the Patient Protection and Affordable Care Act (PPACA), reformed health coverage laws in the United States.

The two primary goals of the Affordable Care Act requirements include:

1. Making health insurance policies more affordable and accessible.
2. Backing new medical care delivery methods that intend to reduce healthcare costs.

The ACA requires that applicable large employers (ALEs) that have 50 or more full-time workers who work 30 or more hours a week must offer coverage to their staff and applicable dependents. Businesses will face penalties if they fail to comply. These employers must also ensure the insurance options they offer meet the minimum essential coverage requirements outlined in the act.

What is minimum essential coverage?

The ACA aims to improve the availability and affordability of quality health insurance in the United States. It outlines minimum essential coverage requirements to ensure large businesses are offering coverage that meets high standards of care under the employer shared responsibility provisions.

Small businesses with fewer than 50 full-time workers are not subject to these responsibilities or the penalties for not meeting MEC, but your small company can still reap benefits from offering MEC plans to their workers. In one 2022 survey, 80% of respondents said they prioritize the health insurance coverage an employer offers when they are seeking a new position.

By extending high-quality health insurance, your business is more enticing for top-tier job candidates. Offering MEC plans is also an effective way to help establish a company culture of well-being and encourage your employees to take good care of themselves. Healthy, happy employees mean higher engagement and productivity.

The importance of minimum essential coverage in the Affordable Care Act

The Affordable Care Act and MEC regulations ultimately help more individuals gain access to quality healthcare within their financial means. Without affordable coverage options that include essential care, many people would not be able to pay for the medical services they need.

Minimum essential coverage requirements

The following are a few types of MEC plans that comply with the ACA:

• Employer-sponsored coverage
• Children’s Health Insurance Program (CHIP)
• TRICARE
• Peace Corps Volunteer coverage
• The Nonappropriated Fund Health Benefit Program plans

Some examples of insurance plans that do not count as MEC include:

• Vision-only coverage
• Workers’ compensation
• Dental-only coverage
• Plans offering only discounted healthcare services

What your small business needs to know

Again, businesses with fewer than 50 employees are not subject to the employer shared responsibility provisions. Companies that opt for self-insured healthcare coverage must file an annual return with information for each covered employee with the Internal Revenue Service (IRS). They must also give each covered worker a statement with the same information.

Affordable Care Act penalties

ALEs may face consequences if they fail to comply with ACA MEC guidelines. The employer shared responsibility provision — also called the pay or play provision — of the ACA went into effect in 2014. It mandates that ALEs offer MEC or else pay a fine to the Internal Revenue Service (IRS).

Other noncompliance penalties that ALEs may face if they fail to offer adequate coverage to their employees include the following:

• 4980H(a): Applicable employers who do not offer at least 95% of full-time staff — and those workers’ dependents — MEC and have at least one full-time worker that receives a premium tax credit for the year could face the 4980H(A) penalty. The employer will have to pay $2,880 per full-time employee per year, minus the first 30, as they are special exemptions.
• 4980(b): If an ALE offers MEC that costs more than 9.12% of the employee’s pay, covers less than 60% of care expenses, or an employee receives a premium tax credit for the year, the ALE could face the 4980(b) penalty in which the employer is responsible for paying $4,320 per full-time employee per year.

Choosing the right minimum essential coverage plan for your employees

Be sure to explore the following factors before deciding on the MEC plans to offer your staff:

• Fully-funded vs. self-funded plans: There are two main types of plans employers can choose from. The first is a fully funded plan in which the employer pays an insurance company a monthly premium and the insurer handles ongoing claims. The second is a self-funded plan where the business sponsors the plan and pays out claims to members as needed.
• Ongoing costs: Employers are responsible for covering the majority of the premium for health plan members. Before choosing the plans to offer your team, consider what your company can afford now and how it will accommodate future growth.
• Working with an expert: If your small business is searching for MEC insurance plans, it can be highly advantageous to work with an insurance expert who can help you find the right employer health plan and benefits coverage for your team.

Find employer health plans and benefits coverage with MagnaCare

When your business needs MEC health plans, turn to MagnaCare. We are here to help you get the most affordable options possible with self-funded MyMEC plans that are exempt from state taxes and coverage mandates.

MyMEC plans from MagnaCare are superior for a few reasons. They are a tax-deductible employer contribution. Your business will receive its unused funds at the end of the year, and we offer identical plan coverage in every state.

Are you ready to get started? Contact MagnaCare to learn more about giving your team MEC healthcare plans they can depend on.