What Minimum Value Means
A plan provides Minimum Value (MV) if it:
- Pays at least 60% of the total allowed cost of benefits provided under the plan, and
- Provides substantial coverage of inpatient hospital and physician services
Minimum value matters for the employer mandate. For Applicable Large Employers (ALEs), offering coverage that provides minimum value, and is affordable, relates to the §4980H(b) penalty. Minimum value also affects whether employees may qualify for a Premium Tax Credit.
How Minimum Value Is Determined
- Small group (fully insured): Plans at the Bronze level or higher are considered minimum value, so all ACA metal-tier small group plans meet the minimum value standard automatically.
- Large group (fully insured): The insurance carrier determines whether each plan provides minimum value.
- Level-funded: The level-funded carrier or administrator typically works with the employer to determine whether the plan provides minimum value.
- Self-funded: The employer typically determines minimum value with help from its TPA, administrator or actuary, generally using the federal MV calculator, an approved safe harbor plan design, or an actuarial certification.
Every group health plan’s Summary of Benefits and Coverage (SBC) includes a statement of whether the plan provides minimum value.
Coverage That Doesn’t Provide Minimum Value
- “MEC-only” or “skinny” plans that cover mainly preventive care. These count as Minimum Essential Coverage, which relates to the §4980H(a) penalty, but they don’t provide minimum value.
- Plans that pay less than 60% of allowed costs
- Plans that don’t substantially cover inpatient hospital and physician services
Important: This information is provided for general educational purposes. It is not legal or tax advice. How these rules apply depends on each employer’s specific circumstances, so employers should review their situation with their own legal counsel, ERISA attorney, CPA or tax advisor.