Minimum Essential Coverage (MEC) is a health insurance policy that provides at least one of the Essential Health Benefits as detailed by the Affordable Care Act (ACA). For a complete list of the Essential Health Benefits, visit www.Healthcare.gov.

The Affordable Care Act (ACA) requires all employers offer and individuals to maintain coverage that meets certain criteria to avoid penalties.

Individual Penalties

The penalty for individuals that do not have Minimum Essential Coverage is known as the “individual mandate”. Individuals who do NOT have the minimum required coverage will be assessed a penalty when filing their income taxes. The “individual mandate” penalty is 2.5 percent of household income, or $695 per adult and $347.50 per child, whichever is greater for 2018. 

As of 2019, the “individual mandate” penalties have been eliminated.

Employer Penalties

Under ACA there are two penalties that impact employers with over 50 full-time (employees working a minimum of 30 hours per week) equivalent employees during the preceding calendar year. Therefore, an employer must determine if it meets the 50 employee threshold for the current calendar year by evaluating its workforce for the prior calendar year.

• Strong Penalty: Employers must offer MEC to at least 95 percent of its full-time employees and their dependent children (spouses are not considered dependents). If an employer fails to meet MEC coverage requirements, it could be assessed a penalty equal to the number of its full-time employees for the year, minus the first 30, times $2,260.
• Weak Penalty: The ACA requires that health coverage meet a minimum value, which means it covers certain types of medical expenses and is designed to pay at least 60 percent of employees’ health care costs. The ACA also requires a health plan to meet an affordability standard, which limits the amount an employer can charge an employee for employee only coverage. For 2018, the limit an employer can charge an employee is 9.69 percent of their income. There is no limit on the amount an employer can charge for their dependents. Failure to meet minimum value or affordability could subject an employer to a nondeductible $3,390 penalty for each full-time employee who purchases health insurance coverage on the Marketplace, also referred to as the “Exchange”, with premium tax credits.