Reducing Some of the Confusion on the ACA

May 28, 2013

Well, it’s been three years, and only now are many of our prospects and customers really starting to study the ACA. As someone who has watched it carefully since the early days, I am frankly still surprised it passed, as our difficult legislative process gives you at most one shot to enact a huge reform like this.

Judging the ACA on its third birthday is taking a snapshot of a law that’s still relatively immature. The real “meat” of the law hits in about 7 months, in 2014. Along with all of the political headlines, the law includes a lot of new and fairly confusing language.

For example, these three: Essential Health Benefits, Minimum Essential Coverage, and Minimum Value Coverage. It might be easy to gloss over these phrases because they sound alike, but it’s crucial to know that they are very different things. Let’s review:

Essential Health Benefits

Beginning in 2014, policies in the individual and small group markets will be required to provide coverage for each of the 10 “essential health benefits” regardless of whether the policy is purchased through or outside the exchange. Self-funded plans (regardless of size), large group plans and grandfathered plans (regardless of size) do not have to cover all 10 essential health benefits, but they will not be allowed to put lifetime or annual dollar limits on an essential health benefit.

Minimum Essential Coverage

Beginning in 2014, most Americans will be required to have “minimum essential coverage” or pay a penalty with their tax return. (In 2014, the penalty will be the greater of 1 percent of income or $95.) A person will have minimum essential coverage if he or she is covered under an eligible employer-sponsored plan, an individual policy (through or outside the exchange) or a government plan (Medicare, Medicaid, etc.).

Minimum Value Coverage

Beginning in 2014, employers with 50 or more full-time or full-time equivalent employees that offer coverage that is less than “minimum value” will have to pay a penalty. (The penalty for not providing minimum value, affordable coverage is $3,000 for each full-time employee who obtains coverage through a public exchange and receives a premium tax credit/subsidy. Individuals will not be eligible for a subsidy if their employer offers them affordable, minimum value coverage.)