The Affordable Care Act uses the term Minimum Value. It's a term used to describe the level of coverage a group plan must provide. This is important as it allows you to qualify for a subsidy if the value of your employer-sponsored insurance falls below the minimum.
Minimum Value Standard
Minimum value standards are one of 10 requirements for exchange subsidies. The minimum value standard is a requirement that ensures a health plan covers 60% of the average medical cost and provides substantial coverage for hospital inpatient services and physician services. This coverage is typically included in the plan's Summary of Benefits and Coverage (SBC).
Definitions of minimum value
The term minimum value, which is ACA-specific, means that an employer-sponsored health plan must provide adequate coverage for employees. It also means that the plan must provide enough coverage to meet a certain threshold level, called the actuarial value, which is based on the average cost of medical services.
A plan must, in essence, provide at least 60% of its actuarial worth to be eligible for a tax credit. This is a relatively low amount, but it is a significant one because it allows employees to get covered at a lower price than they might otherwise have had to pay.
In math, the term "minimum" and "maximum" are used to describe the smallest and largest values of a function that can be determined in a particular domain. These terms appear a lot when it comes to mathematical analysis. Understanding what they are can help you understand their importance.
Understanding that minimum values are different from related concepts is also important. Sometimes, "minimum value", "minimum necessary coverage" or "minimum cover" are used interchangeably.
This confusion is especially common because both of these terms have different functions and definitions under the ACA. In order to meet the minimum essential requirements, a health plan must provide coverage for the ten core benefits outlined in the ACA regulations.
A plan that does not provide the minimum essential coverage will still need to cover some or all of the 10 essential health benefits to qualify for a tax credit. Because the ACA stipulates that each individual must have health coverage.
It is important to understand this confusing concept. If you don’t have the minimum necessary coverage, you’ll be subject to the individual responsibility tax penalty.
The Affordable Care Act defines "minimum essential coverage" as "coverage that provides a minimum level of protection." It includes coverage such as job-based insurance, individual market policies and Medicare, Medicaid, CHIP or TRICARE.
The ACA also mandates that every health plan provided by an employer offer a minimum percentage of benefits as essential healthcare benefits (EHBs). It includes services like prescription drugs, maternity care and preventive health. Some employers might also be required by law to provide EHBs for additional services, like vision and dental.