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Minimum Essential Coverage

Current healthcare law requires major medical policies to meet “minimum essential coverage” requirements. Any plan you buy today that’s approved by the Affordable Care Act (ACA or Obamacare) will count as minimum essential coverage, but you might not know what this means or how it impacts your quest for the right health insurance plan. In short, you benefit as a consumer and a patient by buying a comprehensive health plan. But you should also know that thanks to a big change taking place in 2019, you won’t be required to hold this kind of coverage anymore, which could open up some options for you if you don’t want or can’t afford major medical insurance. Knowing what’s in store could help you make a better decision about your health insurance for next year.

Qualifying Insurance Plans

The ACA established standards for all health insurance plans, whether they are privately purchased, employer-sponsored or obtained by some other means. Those plans that meet the lowest acceptable standard are considered minimum essential coverage, and Americans are encouraged to carry a plan that, at the very least, meets the ACA’s minimum guidelines. Such coverage is known as a qualifying health plan.

Minimum essential coverage is available from a variety of sources. Some of the most common types of minimum essential coverage are:

  • Major medical insurance purchased through the healthcare marketplace
  • Individual or family plans purchased outside the healthcare marketplace, as long as they meet the standards of the ACA
  • Job-based insurance, including group plans and self-insured plans
  • Medicare Part A and Medicare Advantage
  • Student healthcare coverage
  • Catastrophic insurance plans
  • Full coverage through Medicaid or the Children’s Health Insurance Program (CHIP)
  • TRICARE for military members
  • Work-based retiree coverage
  • Health insurance via COBRA

Short term health plans aren’t considered minimum essential coverage. Discount plans and policies with limited benefits, such as those that cover only hospitalizations or dental care, don’t qualify either.

Minimum Essential Coverage and the Individual Mandate

Under Obamacare, most American citizens must carry minimum essential coverage. Those who don’t hold a qualifying health plan may be required to pay a fine. This fee is commonly known as the individual mandate penalty, but its official name is the individual shared responsibility payment.

The affordability of Obamacare depends on both healthy people and those with medical problems carrying health insurance. If the risk pool has too high a concentration of people with health issues, insurers must raise premiums in order to keep meeting their financial obligations. When a large number of healthy people are also contributing premium payments, the risk pool balances out so that costs can stabilize. The individual mandate was designed to encourage people of all ages and medical statuses to participate in Obamacare – in other words, to stabilize the private health insurance market.

For 2018, if you don’t carry minimum essential coverage, you’ll be required at tax time to pay the greater of two calculations: $695 per uninsured adult and $347.50 per uninsured child in your household, or 2.5 percent of your household’s taxable income. There are caps in place to limit this burden.

Expanded Exemptions

The ACA in its original form included provisions for limited exemptions from the individual mandate. For example, if the only qualifying health plans available to someone were deemed unaffordable, then that person wouldn’t be required to pay the fine. In 2018, the Trump administration expanded the list of exemptions that allow people to skip out on the minimum essential coverage requirement.

Anyone who lives in an area where there are no marketplace plans available can get out of purchasing minimum essential coverage, and so can those who live in a region with only one marketplace insurer. Since the inception of the ACA, no county has ever been without any coverage, so that exemption has been unnecessary. However, in 2018, about 26 percent of people with an Obamacare plan had only one insurer option on the exchange. Instead of purchasing minimum essential coverage in 2018, those people could choose to opt out.

Another new policy relates to abortion. Those morally opposed to abortion now have the right to claim an exemption if all of the marketplace plans available to them cover abortion services.

Finally, the Trump administration also instituted a broad exemption for personal hardships. This covers a variety of circumstances that might make it difficult or impossible for a person to purchase major medical coverage that meets his or her personal needs.

Changes for Obamacare 2019

Even greater changes are in store for health insurance in 2019. The fine for not having qualifying health insurance will drop from $695 or more down to $0. The Tax Cuts and Jobs Act of 2017 zeroed out the penalty.

The elimination of the fine applies only to 2019 and the years to follow, so you won’t notice a difference at tax time until 2020. If you didn’t have minimum essential coverage in 2018, unless you can claim an exemption, you’ll still owe the penalty when submitting your tax return in early 2019.

Note that the individual mandate itself has not been removed. Theoretically, it could be interpreted that Americans are still expected to purchase minimum essential coverage. In reality, however, since there is no penalty for not buying qualifying health insurance, there’s no real obligation to do so. Without the accompanying penalty, the mandate is meaningless.

Removing the individual shared responsibility payment could have significant effects on the number of people who purchase qualifying health insurance through the marketplace or another source. The Congressional Budget Office has suggested that approximately 3 million to 6 million fewer Americans may have minimum essential coverage by 2021. The department has also estimated that, as a result, health insurance premiums will go up about 10 percent in that time.

The removal of the penalty is a federal change. States have the option to enforce their own individual mandate penalties. Currently, both Massachusetts and New Jersey have such laws. Other states may choose to follow suit in an effort to keep more people covered by qualifying health plans.

Health Insurance Options

If you don’t live in a state with its own individual mandate, you may feel a newfound sense of freedom when it comes to health insurance in 2019. Without any obligation to buy an expensive, comprehensive health plan, you might choose not to. But evaluate your healthcare needs first.

Even without the fee in place, you might find that purchasing major medical insurance remains your best choice. When you buy an ACA-compliant plan, such as those available through the marketplace in 2019, you’ll have access to the 10 essential health benefits outlined in the ACA. These include emergency treatment, mental health services, prescription drugs and maternity care.

On the other hand, particularly if you don’t qualify for advance premium tax credits, the elimination of the penalty might pique your interest in considering other options. Short term health insurance is a common alternative. These plans are less comprehensive in scope than major medical insurance, but they also cost significantly less. New Trump administration rules that take effect in October will allow you to keep one of these plans for nearly a year at a time and renew it for a total coverage period of up to 36 months. Before choosing to forgo a major medical plan, it’s a good idea to carefully weigh your options.

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