What Is the Minimum Value Standard for Health Plans?
Understand the Minimum Value Standard: the essential benchmark for employer health plans, defining coverage quality and financial implications.
The Minimum Value Standard (MVS) is a key concept within the Affordable Care Act (ACA), especially for employer-sponsored health coverage. This standard ensures that health plans offered by employers provide a foundational level of benefits to employees. Understanding the MVS is important for businesses to comply with federal regulations and for individuals assessing their health insurance options. It establishes a baseline for adequate health coverage, influencing decisions for employers and their workforce.
Understanding the Minimum Value Standard
The Minimum Value Standard defines a threshold for the comprehensiveness of an employer-sponsored health plan. Its purpose is to ensure that coverage offered by Applicable Large Employers (ALEs)—those with 50 or more full-time equivalent employees—provides substantial coverage for common medical expenses. This standard focuses on the actuarial value of a health plan, which represents the percentage of total average costs for covered benefits a plan is expected to pay. Meeting the MVS means a plan is designed to cover a significant portion of healthcare costs, reducing the burden on the insured individual.
The MVS is not about the premium cost, but the generosity of its benefits. For a health plan to meet this standard, it must cover at least 60% of the total allowed costs of benefits. This actuarial value calculation considers the plan’s overall design, including its deductibles, copayments, coinsurance, and the scope of services covered. The MVS acts as a benchmark, guiding employers to offer plans that mitigate healthcare financial risks for their employees.
Core Health Benefits and Cost-Sharing Requirements
Health plans meeting the Minimum Value Standard must cover a broad range of services. This includes physician and inpatient hospital services, which are fundamental components of healthcare. Prescription drug coverage is also a necessary inclusion for a plan to achieve MVS status.
Beyond covered services, MVS plans must also adhere to specific cost-sharing limitations. The annual out-of-pocket maximum for essential health benefits cannot exceed certain inflation-adjusted limits, set by the IRS annually. For 2025, these limits are $9,200 for self-only coverage and $18,400 for family coverage. These limits encompass deductibles, copayments, and coinsurance amounts an enrollee might pay over a plan year.
Assessing Minimum Value
Employers use established methods to determine whether their health plans satisfy the Minimum Value Standard. One common approach involves utilizing the Minimum Value Calculator, an online tool provided jointly by the Department of Health and Human Services and the Internal Revenue Service. This calculator allows employers to input details about their plan’s design, such as deductibles, copayments, and the types of benefits offered. The tool then estimates the plan’s actuarial value, indicating whether it meets or exceeds the 60% threshold.
Alternatively, employers can obtain a certification from a qualified actuary to confirm their plan’s compliance with the MVS. Actuaries use detailed actuarial methods and data to assess the expected average costs covered by the plan, providing a professional attestation of its minimum value. Both the calculator and actuarial certification verify that the health plan provides the required level of financial protection, helping employers ensure compliance with ACA requirements.
Implications for Health Coverage
Meeting the Minimum Value Standard has implications for both employers and their employees under the ACA. Applicable Large Employers that do not offer affordable health coverage meeting the MVS to substantially all of their full-time employees may face penalties under the employer shared responsibility provisions. These “employer mandate” penalties can be substantial, depending on the number of full-time employees and whether any receive premium tax credits through the Health Insurance Marketplace. For example, the penalty for not offering MVS coverage, if at least one full-time employee receives a premium tax credit, can be approximately $312.50 per month per full-time employee for 2025, excluding the first 30 employees.
For employees, the MVS directly impacts their eligibility for premium tax credits and other subsidies to purchase health insurance through the Health Insurance Marketplace. If an employee is offered employer-sponsored coverage that meets the MVS and is considered affordable (meaning the employee’s share of the premium for self-only coverage does not exceed approximately 8.39% of their household income for 2025), they are generally not eligible for Marketplace subsidies. Conversely, if the employer’s plan fails to meet the MVS or is deemed unaffordable, eligible employees may then qualify for these financial assistance programs.