8885 / When does employer-sponsored health coverage provide “minimum value” for purposes of the Affordable Care Act?
Employer-sponsored health coverage provides “minimum value,” so that it also provides minimum essential coverage, if the plan covers at least 60 percent of the total allowed costs of benefits provided under the plan.1 Beginning in 2014, an employer that offers health coverage to its employees is required to provide each employee with a Summary of Benefits and Coverage, which is a document that explains the benefits provided under the plan and must also include a statement as to whether the plan provides minimum value.
The Department of Health and Human Services and the IRS have provided guidance stating that a health plan that does not cover substantial hospital and physician services will not provide minimum value, and cannot satisfy an applicable large employer’s obligation to provide health coverage to avoid the shared responsibility penalties.2
If an employee enrolls in a plan that does not provide minimum value, that employee is ineligible to claim the premium assistance tax credit even though the plan fails to provide the required coverage.