What Is the Minimum Value Standard for Health Insurance?
Explore the Minimum Value Standard for employer health plans. Understand the baseline for robust coverage and its key distinctions.
What Is the Minimum Value Standard for Health Insurance?
The Minimum Value (MV) standard for health insurance is a requirement established under the Affordable Care Act (ACA). This standard applies to employer-sponsored health plans, ensuring the coverage provides a certain level of benefit generosity. Its purpose is to ensure health plans offered by applicable large employers deliver substantial financial protection for common medical expenses. This defines adequate health coverage in employer-provided benefits.
Understanding Minimum Value Coverage
A health plan must cover a broad range of services to meet the Minimum Value standard. These plans are required to provide substantial coverage for physician services and inpatient hospital care. This means a significant portion of costs for doctor visits and hospital stays should be covered.
Beyond physician and inpatient hospital services, an MV plan includes coverage for various essential health benefit categories. These categories encompass services such as emergency care, laboratory services, maternity and newborn care, mental health and substance use disorder services, prescription drugs, and preventive services. This ensures individuals have access to necessary medical care.
Calculating Minimum Value
A health plan meets the Minimum Value standard if it covers at least 60% of the total allowed costs of benefits. This 60% is known as the “actuarial value” of the plan, representing the percentage of total average costs for a standard population a health insurance plan is expected to cover. The remaining costs, on average, would be paid by policyholders through deductibles, copayments, and coinsurance.
Employers have methods to determine if their health plans meet this 60% actuarial value threshold. One method involves using the Minimum Value Calculator provided by the Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS). This calculator allows employers to input plan details and cost-sharing arrangements to assess compliance. Alternatively, for plans with complex or non-standard features, an actuarial certification may be obtained to verify the plan satisfies MV requirements.
Minimum Value and Affordability
Minimum Value and affordability are two distinct, yet related, requirements for employer-sponsored health coverage under the ACA. Minimum Value pertains to the generosity of the health plan’s benefits, ensuring it covers a substantial portion of medical costs. It focuses on what the plan pays for covered services, such as physician visits and hospital care.
Affordability relates to the cost of the employee’s premium share for self-only coverage. This standard dictates the employee’s contribution for their health insurance premium should not exceed a certain percentage of their household income.
Meeting the Minimum Value standard does not automatically mean a plan is affordable, nor does an affordable plan necessarily meet Minimum Value. For instance, a plan might cover 60% of costs, meeting MV, but still have a premium considered too high for an employee based on their income. These two criteria work in tandem to define the employer shared responsibility provisions under the ACA.