By Joe Touschner
Minimum essential coverage (not to be confused with the essential health benefits) is an important concept in the Affordable Care Act. Those who have minimum essential coverage (MEC) satisfy the individual responsibility requirement, that is, they meet the ACA’s individual mandate to have health insurance. Those who don’t have MEC other than in the individual market can qualify for premium tax credits if they meet other eligibility criteria.
In general, Medicaid is considered to be MEC—being enrolled satisfies the mandate and being eligible makes one ineligible for premium tax credits. But not always—Medicaid coverage takes many forms, from pregnancy-related benefits offered by some states to wrap-around coverage for certain privately-insured children with high health needs to coverage that kicks in only when an individual spends enough on medical needs to qualify. The decision on whether these more limited forms of Medicaid coverage is MEC is an important one for many families—it can determine whether premium tax credits are available or whether an individual risks paying a penalty for going without insurance. The IRS recently finalized a rule that answers some the outstanding questions about when Medicaid is MEC, though the rule leaves other situations for future determinations.
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When Medicaid covers only pregnancy-related services, it is not MEC. Therefore, enrolled pregnant women can also qualify for premium tax credits if they are otherwise eligible. At the same time, women enrolled in this type of Medicaid could also face a penalty if they don’t sign up for coverage for their other health needs, although the IRS announced it will not assess penalties for these enrollees for 2014.
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Medicaid coverage that is premium assistance (under sections 1905, 1906, or 1906A of the Social Security Act), coverage for disabled children under TEFRA (for families with incomes otherwise too high for Medicaid), and children’s coverage under the Family Opportunity Act all qualify as MEC. This means that those enrolled in these types of coverage will not simultaneously be eligible for premium tax credits.
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For coverage under section 1115 waivers, ‘Katie Beckett’ waivers, and through Medicaid spend-down programs, the rules aren’t yet final. But the IRS says it expects to treat them as not MEC, unless the Secretary of HHS determines that they are. This will provide some flexibility to handle the varied types of coverage provided under these programs. Like pregnancy-related coverage, the IRS won’t assess individual responsibility penalties for these enrollees for 2014.
These decisions mean that for some families, such as those eligible for Family Opportunity Act coverage, Medicaid and premium tax credits can’t be used together. To the extent that families want to use Medicaid as a wrap for other coverage, they will need to finance the private coverage without the ACA’s premium tax credits. This may lead some families to choose Medicaid alone for eligible members rather than as a supplement to private coverage they or their employers pay for. It seems that there will only be a select number of situations—for women receiving pregnancy-related services only and other limited-benefit plans determined by HHS—where Medicaid eligibility and premium tax credits can be combined.
For a further discussion of these rules, see a recent update on Health Reform GPS.