Under the Affordable Care Act (ACA), "minimum essential coverage" (MEC) is any type of insurance coverage that meets the individual shared responsibility requirement, also known as the individual mandate.
That definition can seem pretty vague and confusing, especially to someone who’s never purchased an insurance policy on their own before—or never been insured at all.
Read on to learn more about:
- Which types of insurance coverage do and don’t satisfy the individual mandate
- What happens if you don’t have qualifying coverage
- What kind of coverage works with a health reimbursement arrangement (HRA)
What qualifies as minimum essential coverage?
The good news about MEC is that there’s a wide variety of insurance options that satisfy the individual mandate, so you’re bound to find one that meets your personal and family insurance needs.
We’ll go over three types of coverage that satisfy the individual mandate:
- Employer-sponsored coverage
- Individual health coverage
- Coverage under government-sponsored programs
Let’s start with the most popular option—employer-sponsored coverage. This includes any kind of group health insurance policy you got through your job.
According to the Kaiser Family Foundation, nearly half of all covered workers in the U.S. have an insurance plan they got through their employer.
Examples of employer-sponsored coverage include:
- Employer-provided group health plans
- COBRA coverage
- Retiree coverage
Individual health coverage
Next up is individual health coverage, or any insurance policy you purchased on your own and only covers you. While group health insurance policies are the traditional choice for health insurance, individual policies have been growing in popularity in recent years.
Healthinsurance.org reports that somewhere between 42 million and 50 million Americans have enrolled in a plan that satisfies the individual mandate since 2014 (when the ACA was first introduced). Of that number, the individual market insured about 13 million Americans in 2020 alone.
Examples of individual health coverage include:
- Health insurance you purchased from an insurance company directly
- Health insurance you purchased through the Health Insurance Marketplace
- Most health insurance provided through a student health plan
- Check with your school to see if the plan counts as qualifying health coverage
Coverage under government-sponsored programs
Finally, there’s coverage under government-sponsored programs. Depending on your age, disability status, poverty level, military service, or other factors, you may be able to qualify for an insurance policy at a reduced cost through the government.
Examples of coverage under government-sponsored programs include:
- Medicare Part A coverage
- Medicare Advantage plans
- Most Medicaid coverage
- Children’s Health Insurance Program (CHIP)
- Most types of TRICARE coverage under chapter 55, title 10 of the United States Code
- Comprehensive healthcare programs offered by the Department of Veterans Affairs
- State high-risk health insurance pools
- Only for a plan year beginning on or before December 31, 2014, unless recognized as minimum essential coverage by HHS
- Health coverage provided to Peace Corps volunteers
- Department of Defense Nonappropriated Fund Health Benefits Program
- Refugee Medical Assistance
What doesn’t qualify as minimum essential coverage?
In order to qualify as MEC, an insurance policy needs to cover a minimum level of health needs. So that means any kind of coverage that provides only a “limited” set of benefits doesn’t satisfy the individual insurance mandate.
Examples of coverage that may provide limited benefits include:
- Coverage consisting solely of excepted benefits, such as:
- Stand-alone dental and vision insurance
- Accident or disability income insurance
- Workers' compensation insurance
- Certain Medicaid policies, including:
- Medicaid providing only family planning services, tuberculosis-related services, or coverage limited to treatment of emergency medical conditions
- Pregnancy-related Medicaid coverage
- Medicaid coverage for the medically needy
- Section 1115 Medicaid demonstration projects
- Certain TRICARE coverage, including:
- Space available TRICARE coverage provided under chapter 55 of title 10 of the United States Code for individuals who are not eligible for TRICARE coverage for health services from private sector providers
- Line of duty TRICARE coverage provided under chapter 55 of title 10 of the United States Code
- Certain AmeriCorps coverage, including:
- AmeriCorps coverage for those serving in programs receiving AmeriCorps State and National grants
- AfterCorps coverage purchased by returning members of the PeaceCorps
Additionally, most insurance types offered between annual open enrollment periods, such as short-term health insurance, fixed benefit plans, and supplemental insurance won’t satisfy the individual mandate either.
Will I be penalized if I don’t have minimum essential coverage?
When the ACA was first introduced, Americans who didn’t satisfy the individual mandate were penalized with a fee. However, as of 2019, the individual mandate is no longer in force for most states, so you don’t have to have a policy that meets MEC if you don’t want to.
You may be wondering: Why should I bother getting coverage that meets the individual mandate if it’s no longer in force? While the federal government no longer requires it, there are certain HRAs that require you to have MEC in order to participate—or at least to fully benefit from it. More on that in the next section…
Do I need minimum essential coverage to be eligible for an HRA?
Participating in an HRA is a great way to get your health insurance premiums and other health expenses covered through your employer.
However, depending on the type of HRA your employer offers, you may need to have a certain type of insurance in order to be eligible.
We’ll go over three HRAs and what kind of insurance you need to have in order to qualify:
- The qualified small employer HRA (QSEHRA)
- The individual coverage HRA (ICHRA)
- The group coverage HRA (GCHRA)
Qualified small employer HRA (QSEHRA)
A QSEHRA is a formal health benefit for employers with fewer than 50 full-time equivalent employees. With a QSEHRA, employers reimburse employees tax-free for their medical expenses, including individual health insurance premiums.
All full-time employees are eligible to participate regardless of their insurance status, so you don’t need any specific type of insurance in order to be eligible—you don’t even need to be insured at all.
However, in order to get reimbursed tax-free for your medical expenses, you do need coverage that meets MEC. If not, you’ll simply pay taxes on each of the products and services you get reimbursed through your QSEHRA.
Individual coverage HRA (ICHRA)
Next, there’s the ICHRA. This is a formal health benefit for organizations of all sizes to reimburse their employees for their individual insurance premiums and medical expenses.
As the name suggests, individual coverage is required in order for employees to be eligible to participate. This coverage also needs to be MEC, but not all types of MEC will work with the ICHRA.
Group coverage HRA (GCHRA)
Lastly, there’s the GCHRA. This HRA is available exclusively for employers who want to offer an HRA with their group health plan. That means if you have a GCHRA, then you’re already covered under a qualifying form of MEC (employer-sponsored coverage), so you’re all set!
Understanding which types of insurance plans are considered minimum essential coverage is an important first step to choosing a policy that works best for you and your family, especially if you hope to combine your coverage with an HRA. Moving forward, you’ll be ready to make smart decisions about your insurance to get the coverage you need.
This article was originally published on June 9, 2014. It was last updated May 3, 2021.