Understanding Health Care Reform: Affordable Coverage
An Applicable Large Employer cannot simply just offer coverage in order to meet Affordable Care Act requirements. In order to be compliant, an employer must meet certain coverage standards.
There are three standards:
1. Affordable Coverage
2. Minimum Essential Coverage
3. Minimum Value Coverage
Each one has particular standards that need to be met in order for an employer to meet ACA requirements.
What is Affordable Coverage?
The Affordable Care Act mandates that the lowest cost self-only health plan is only 9.5 percent or less of a full-time employee’s household income. If multiple options are offered, the affordability test applies to the one with the lowest cost.
However, it’s not always possible for an employer to know a household income. Because of this, the ACA allows for three safe harbors that can use 9.5 percent of:
• An employee’s W-2 compensation
• A rate of pay that is based on monthly salary of hourly wages
• The federal poverty line
What is Minimum Essential Coverage?
The cost of coverage isn’t the only element that’s tested. The ACA also requires that an employer offer Minimum Essential Coverage. You can speak with your insurance adviser to ensure your compliance with Minimum Essential Coverage. You can also find this info on your certificate coverage.
What is Minimum Value Coverage?
While Minimum Essential Coverage deals with what is covered in a plan, Minimum Value Coverage concerns itself with the cost coverage within the plan. In order to be compliant, a plan must cover at least 60 percent of total allowed costs that are expected to be incurred in the plan.
If a plan fails to substantially cover in-patient hospitalization or physician services, an employer must use the minimum value calculator, which can be downloaded here.
Making Sense of the Coverage
There is a lot of information involved with keeping ACA compliant. If you need help getting your information in order for reporting, my aca partner can help. Please contact Vicki Trettel at 330.867.7350 to schedule an appointment with one of our experts.