Anybody paying attention to the healthcare reform debate over the last couple of decades knew that the process of updating America’s massive healthcare network was going to be a bumpy road. Still, nobody was prepared for the upheaval caused by the implementation of the Affordable Care Act (ACA), more commonly referred to as Obamacare.
Some were upset by the fact that the ACA mandated coverage for all Americans, with penalties for failure to maintain mandatory minimum essential coverage as dictated by the law. Others praised the fact that Obamacare provided affordable healthcare options for tens of millions of Americans previously unable to get health insurance due to high costs or preexisting conditions.
No matter how you look at it, though, Obamacare has changed our healthcare system, and mostly for the better. It has made all Americans responsible for seeing to their own healthcare needs, much like car insurance makes drivers responsible when they get behind the wheel.
It has also placed a greater burden on insurance providers to lower costs and provide benefits that meet certain standards, ensuring that all U.S. citizens (and qualified residents) have access to proper preventive care and other necessary services. Of course, any change of this size comes with an attendant learning curve.
If you’re still wondering just what minimum value standard is and how it applies to your health insurance, here are the basics.
What is Minimum Value Standard?
Not to be confused with minimum essential coverage, which pertains to an individual’s mandate to maintain appropriate health insurance, minimum value standard refers to the cost-value ratio of a given health insurance plan.
According to Healthcare.gov, in order to meet minimum value standard, a health plan must “pay at least 60% of the total cost of medical services for a standard population”. In addition, benefits like physician and hospital services must receive “substantial coverage”.
This may seem somewhat vague, but keep in mind that it’s only a basic definition. The U.S. Department of Health and Human Services actually published a 40-page document for regulations defining minimum value in 2013 to clarify exactly what minimum value standard entailed. Not surprisingly, there are programs available that are specifically designed to calculate minimum value standard.
Minimum Value and Employers
Minimum value standard relates largely to health insurance provided by employers. In some cases, businesses that meet the employer mandate by providing policies that ensure employees are able to meet minimum essential coverage under the ACA may not actually meet the minimum value standard in the process.
The problem lies in the fact that minimum essential coverage may not actually be affordable for some employees. If this is the case, it does not meet the minimum value standard. How can employers know this is the case, though, if they’re not privy to the household income of their employees?
Because employers of a certain size (50 or more employees) are required to provide not only minimum essential coverage options for employees, but also minimum value, there are safe harbor options in place to help employers meet standards. Employers may use W-2 forms, rate of pay, or the federal poverty line to determine affordability, shared responsibility for premium payments, and minimum value standard for insurance policies offered through an employer-sponsored health plan.