Minimum Essential Coverage

DEFINITION of 'Minimum Essential Coverage'

The type of health insurance policy an individual needs to meet health coverage requirements under the Patient Protection and Affordable Care Act (ACA), U.S. health reform enacted March 23, 2010. Individuals who do not maintain minimum essential coverage may have to pay a penalty in 2014 and beyond equal to 1% of their yearly household income or $95 per person ($47.50 for children), whichever is greater. The fee increases each year; for example, in 2015 the fee increases to 2% of income or $325 per person, and 2.5% of income or $695 per person during 2016, whichever amount is higher.

BREAKING DOWN 'Minimum Essential Coverage'

You are considered to have minimum essential coverage and won’t have to pay the penalty if you have:

  • Any health insurance plan sold on the Health Insurance Marketplace;
  • Any individual insurance plan you already have;
  • Any employer plan (including COBRA), including plans that are with or without grandfathered status and retiree plans;
  • Medicare;
  • Medicaid;
  • The Children’s Health Insurance Program (CHIP);
  • TRICARE (applies to current service members and military retirees, their families and their survivors);
  • VA Health Care Program, VA Civilian Health and Medical Program (CHAMPVA) and Spina Bifida Health Care Benefits Program; or
  • Peace Corps volunteer plans.

Coverage only for vision or dental care, workers’ compensation, coverage for a specific disease or condition, and plans that solely offer discounts on medical services do not count as minimum essential coverage under the ACA. Individuals who do not have minimum essential coverage may have to pay a penalty fee; however, certain people with limited incomes and other circumstances may be exempt from the fee. For example, you may not have to pay if you are uninsured for less than three months of the year, the lowest-priced coverage available to you costs more than 8% of your household income, or if you are not required to file a tax return because your income is too low. There are other exemptions, including hardship exemptions (for example, if you are homeless or facing foreclosure).

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