What Is Minimum Essential Coverage?


Since the Affordable Care Act was written into existence, you may have heard the term “MEC” thrown around. How many of us have actually taken the time to learn what this means and how can it apply to our lives? Probably not many of us.

So, let’s take a moment to consider this term and its definition, you’ll see that “MEC” applies to everyone. Whether you are a part-time or full-time employee, this is key in determining your healthcare needs. If you are the owner of an applicable large employer this will be key information when considering the healthcare plans that you offer to your employees. 

Let’s Define This…

MEC stands for minimum essential coverage. This means that under the Affordable Care Act, health plans must meet a minimum level of coverage in order to be considered compliant. They must also be affordable based on the enrollee’s rate of pay.

One goal of the Affordable Care Act has been to eliminate plans that were highly unaffordable as well as plans that are relatively cheap but covered very little. These plans were considered catastrophic. Catastrophic plans might have been considered affordable but the coverage that they offered was skimpy at best and required excessive out-of-pocket costs. 

What Does The ACA Require?

The ACA has strict requirements when it comes to healthcare plans that comply. For example, the plan must have an “actuarial value” of 60% to reach the MEC requirement. This simply means that the plan must cover 60% of your healthcare needs, therefore you pay no more than 40% out-of-pocket. 

You’re An Employee? Learn This…

If your employer is an Applicable Large Employer and you work for them on a full-time basis then they are obligated to offer you affordable healthcare. Since the individual mandate is no longer in place, you won’t have to pay a penalty for not having a healthcare plan.

The IRS basically wants to know that your employer made this offer to you and you either accepted or declined the offer of health insurance. This is why they must report this information.

The main take-away is that your plan should meet the minimum essential coverage (MEC) standard. This means that you are getting a healthcare plan that is deemed fair in terms of the coverage that it provides you relative to the amount you are paying. 

You’re An Employer? Know This…

Are you an employer of less than fifty full-time employees? If you answered yes, then you are not considered an applicable large employer and therefore you are not required to report this information.

If you have more than fifty full-time employees then you are required to file with the IRS. You are also required to mail a form 1095 C to all of your employees annually. Congratulations! You must ensure that you are offering healthcare plans that meet MEC requirements.

Otherwise, you will get hit with penalties left and right. If your employees are able to get a plan of the same value for a better price from the Healthcare Marketplace then your healthcare plans are NOT meeting the minimum required value.

This is a lot of information…what should you do with it? Check out ACAwise! Our reporting solution software will help you handle all of your data and keep you compliant with the IRS!


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