Minimum Essential Coverage

Minimum essential coverage is the type of health insurance policy an individual needs to meet health coverage requirements under the Patient Protection and Affordable Care Act (ACA), U.S. health reform. Individuals who do not maintain minimum essential coverage may have to pay a penalty of 2.5% of yearly household income or a maximum of $695 per adult, $347.50 per child under 18, to $2,085 per household. 

You are considered to have minimum essential coverage and won’t have to pay the penalty if you have:

• Any health insurance plan sold on the Health Insurance Marketplace;
• Any individual insurance plan you already have;
• Any employer plan (including COBRA), including plans that are with or without grandfathered status and retiree plans;
• Medicare;
• Medicaid;
• The Children’s Health Insurance Program (CHIP);
• TRICARE (applies to current service members and military retirees, their families and their survivors);
• VA Health Care Program, VA Civilian Health and Medical Program (CHAMPVA) and Spina Bifida Health Care Benefits Program; or
• Peace Corps volunteer plans.

Coverage only for vision or dental care, workers’ compensation, coverage for a specific disease or condition, and plans that solely offer discounts on medical services do not count as minimum essential coverage under the ACA. Individuals who do not have minimum essential coverage may have to pay a penalty fee; however, certain people with limited incomes and other circumstances may be exempt from the fee. For example, you may not have to pay if you are uninsured for less than three months of the year, the lowest-priced coverage available to you costs more than 8% of your household income, or if you are not required to file a tax return because your income is too low. There are other exemptions, including hardship exemptions (for example, if you are homeless or facing foreclosure).

Some products that help pay for medical services don't qualify, according to the IRS. If you have only this kind of product, you may have to pay the fee. Examples include:

• Coverage only for vision care or dental care
• Workers' compensation
• Coverage only for a specific disease or condition
• Plans that offer only discounts on medical services.

You can pay the fee using the percentage method; only the part of your household income that's above the yearly tax filing requirement is counted. Or by using the per-person method, you pay only for people in your household who don't have insurance coverage. If you have coverage for part of the year, the fee is 1/12 of the annual amount for each month you (or your tax dependents) don't have coverage. If you're uncovered only 1 or 2 months, you don't have to pay the fee at all. Learn about the "short gap" exemption.