Minimum Essential Coverage (MEC) are plans that only cover routine health services such as wellness benefits, preventive care and certain routine medical care. By definition, an MEC plan must cover all 63 CMS listed preventive care services. These plans do not provide traditional, major medical insurance coverage.

The Affordable Care Act has two mandates. The individual mandate requires individuals to have health insurance coverage or pay a penalty. The penalty is $95 per person or 1% of income in 2014 and will get progressively higher in succeeding years. The employer or shared responsibility mandate requires those employers with 100 or more employees in 2015 and those with 50 or more employees in 2016 to offer affordable health insurance coverage. Affordable is defined as those plans that cost 9.5% or less of an employee’s annual W-2 wages and cover at least 60% (minimum value) of the employee’s medical expenses.

If an employer does not offer health insurance coverage, they will pay a penalty of $2,000 for full time employees (minus the first 80 full time employees) if one employee receives a federal subsidy or credit on the public exchange. If an employer does not offer a plan that is affordable, they will pay a penalty of $3,000 for each full-time employee who receives a subsidy/credit, not for every full-time employee.

A MEC plan qualifies as a health insurance plan and satisfies the requirement that health insurance coverage be offered to full-time employees. Thus, the employer avoids the $2,000 per employee tax penalty. Additionally, a MEC plan also satisfies the individual mandate.

However, A MEC plan is not a minimum value plan, it does not cover at least 60% of an employee’s medical expenses, so the employer still faces the $3,000 penalty but only for those full time employees who receive a subsidy/credit on the federal exchange.

An employer can avoid the $3,000 affordability penalty by offering a second or dual option plan that meets the 60% minimum value requirement and 9.5% wage threshold. Since only one plan offered by the employer has to be affordable, the second plan satisfies the affordability requirement.

Most insurance carriers will not partner with a MEC, but we have a privileged program with an A+ rated insurance Carrier that will. This dual option strategy using a MEC plan along with a fully insured major medical is saving our clients thousands of dollars and avoiding ACA penalties. Please consult with a Corporate Benefits Network Advisor today regarding your Employee Benefit options.

Marsha Pfeffer, CSFS, ACBC, LUTCF, CHRS
Sr. Employee Benefits Advisor
marsha@corportatebenefitsnetwork.com
(727) 381-9288 x101