Opportunities & Possible Penalties for Large Employers in 2024
There’s a term that gets thrown around a lot in our industry: Minimum Essential Coverage (MEC). Brokers sell MEC plans all the time, but what does this term mean, and why is it important?
Minimum Essential Coverage Satisfies the Affordable Care Act
The short answer is that MEC is health insurance that satisfies the Affordable Care Act’s (ACA) shared responsibility provision, also known as the individual mandate.1
The slightly longer answer: MEC was created in 2010 for employers to provide minimum essential coverage for preventive health services to meet the ACA Part A requirement and for employees to avoid penalties. Today, the national individual mandate has been eliminated for all but six states (CA, DC, MA, RI, NJ, VT), so MEC plans are primarily a way for employers to avoid the ACA Part A penalty.
ACA Part A Penalty Overview
Employers designated as Applicable Large Employers (ALEs), with 50 or more full-time employees, must offer a MEC plan to 95% of their full-time employees. Employers who fail to offer a MEC plan that provides certain wellness and preventive care to employees may face a hefty penalty per full-time employee, minus the first 30 employees.
Remind Your Large Groups to File IRS Reports by April 1, 2024 2
2023 ALEs must file IRS reports by April 1, 2024, outlining compliance with the ACA’s employer mandate. These employers are required to offer affordable health benefits to eligible full-time employees and dependents, reporting such offers to the IRS every year.
Health insurance plans and exchanges must do the following:
- Produce ACA IRS reports
- File 1094-C and 1095-C electronically by April 1, 2024
- Accuracy is crucial; non-compliance penalties range from $60-630 per form
Types of MEC Plans
There are different types of health plans that count as MEC, including the following:
- Employer-Sponsored Plans
- Individual Health Insurance Plans that follow ACA rules
- TRICARE
- Medicare
- Most Medicaid Plans
- Children’s Health Insurance Program (CHIP)
What’s surprising is that a plan doesn’t always have to follow the rules of the ACA to be MEC. Even some older plans and certain employer-sponsored plans with limited benefits can still count.
MEC with Hooray Health
All MEC plans include preventive services as recommended by the ACA and additional benefits through a First Health Network Provider, such as network discounts and telemedicine.
Insured MEC Plan Overview
- ACA compliant to avoid Part A penalties
- 100% of Covered Preventive Care Services through First Health Network
- $20 copay, then 100% coverage for out-of-network providers
- Policy year renewals, monthly coverage only
Requirements
- Cannot standalone; must be combined with at least one Hooray Health plan, like our fixed indemnity plan
- Minimum enrollment of 100 employees; must be offered to 95% of full-time employees
- 50% minimum employer contribution
What Happens When Claims Exceed the Funding Amount?
Although it’s unlikely, in the case of a shortfall of funds, Hooray Health initiates a cash call requesting additional money. This is how we help keep track of the money going in and out of member accounts and make sure our records are accurate.
Who Owns the MEC Account?
MEC plans are owned by employers.
This feature helps brokers:
- Streamline administration
- Centralize decision-making
- Ensure consistency in coverage
- Offer cost-saving opportunities
MEC Plan Key Points
- Self-Funded MEC Plan offers full insurance for preventive services, covered exclusively through First Health Network Providers.
- The employer must provide a bank account to accumulate funds and enable payments to providers.
- The benefit plan premiums include the Hooray Health plan insurance premium, MEC Claims Reserve, and other fees.
- The MEC plan is automatically Self-Funded through a portion of the benefit plan premiums collected.
- At year-end, surplus funds can be returned to the employer for other benefits or remain in the account for the next plan year.
MEC is Here to Stay
For brokers, understanding and promoting MEC is essential. It ensures large employers comply with regulations, enabling them to access healthcare services and navigate enrollment periods effectively, bolstering brokers’ reputations. MEC is a crucial aspect of healthcare, ensuring individuals have access to necessary medical services. Understanding what qualifies as MEC and its implications can help brokers guide their groups toward informed decisions about full-time employee healthcare coverage.
Hooray Health is Here to Answer Your Questions
Remember, our team is here to help you create tailored solutions that fit the needs of your groups. If you’d like our support in delivering a better care experience, reach out to sales@hoorayhealth.com.
Be well,
Shane Foss,
CEO of Hooray Health
Sources:
1 https://www.healthinsurance.org/glossary/minimum-essential-coverage/
2 https://www.wordandbrown.com/NewsPost/ACA-IRS-Reporting-Overview-2024
