What the heck is MEC?

Health care reform is confusing.  There are so many new terms and concepts.  One concept that has been getting a lot of attention lately is MEC.  MEC stands for “minimum essential coverage” and is a fancy name for basic health coverage. MEC is important for two main reasons —

• First, starting in 2014, individuals who don’t have MEC, and don’t qualify for an exemption, will have to pay a penalty tax.
• Second, starting in 2015, large employers who don’t offer MEC to substantially all of their full-time employees and their dependents (i.e., natural and adopted children) will have to pay a nasty penalty under Code Section 4890H(a) (the “subsection (a) penalty”).

Employers who offer MEC to their employees help their employees avoid the individual penalty tax and, at the same time, help themselves avoid the subsection (a) penalty.

So what exactly is MEC?   MEC is broadly defined to include any group health plan or group health insurance that is not a HIPAA-excepted benefit.  Most group health coverage meets the very broad definition of MEC unless the coverage provides only limited benefits, such as dental or vision-only coverage.  MEC also includes government coverage (such as Medicare and Medicaid), individual health insurance, and various other types of coverage.

For more information on MEC, see the final regulations published on August 30, 2013 and the proposed regulations published on January 27, 2014.  For more information about the employer shared responsibility penalties, please see my Checklist for Employers, the final regulations, and the IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act.