Minimum Value (ACA)
Summary Definition: An ACA standard requiring employer-sponsored health plans to cover at least 60% of the total costs of covered benefits, including doctor and inpatient hospital services.
What is Minimum Value?
Minimum value is one of the Affordable Care Act’s (ACA) requirements for determining whether an employer-sponsored health insurance plan provides minimum essential coverage (MEC).
Specifically, it mandates that such plans cover a substantial portion of physician and inpatient hospital services while paying for at least 60% of the total allowed costs the plan’s benefits are expected to incur.
Combined with the act’s affordability requirements, the two components comprise the ACA’s Employer Shared Responsibility Provision (ESRP), also known as its “Employer Mandate.” Fulfilling this mandate provides employees access to fundamental healthcare services and basic financial protection from large medical expenses.
Sometimes referred to as the “play or pay provision,” the ESRP gives applicable large employers (ALEs) a choice between complying with ACA requirements or contributing to public healthcare subsidies via ESRP payments to the Internal Revenue Service (IRS).
Key Takeaways
- The ACA’s Minimum Value standard helps determine if an employer-sponsored plan provides the required “minimum essential coverage” by requiring the plan to cover at least 60% of the total allowed costs of its covered benefits.
- Under the ACA, plans must also be "affordable" by not requiring an enrolled employee to spend more on monthly costs (e.g., monthly premiums) than a set percentage of their total monthly household income (9.02% in 2025).
- Employers can use the Centers for Medicare & Medicaid Services (CMS) Minimum Value Calculator to ensure their plans are Minimum Value compliant.
Affordable Care Act Summary
Enacted in 2010, the Affordable Care Act expanded access to health insurance and created online marketplaces to help individuals compare and purchase coverages. Other Affordable Care Act key points include:
- requiring insurers to cover essential health benefits, such as preventative services and maternity care
- ending lifetime caps on coverage of serious health conditions
- prohibiting insurers from denying coverage for preexisting conditions
- expanding Medicaid eligibility for low-income individuals
Finally, the ACA program also established the Individual Shared Responsibility Provision (ISRP). Unlike the ESRP, which focuses on coverage from employer-sponsored plans, the ISRP addresses health insurance coverage generally and requires most individuals to have some form of insured coverage.
Minimum Essential Coverage vs. Minimum Value
While the ISRP and ESRP both require plans to provide minimum essential coverage, the two define such coverage differently.
Under the ISRP, minimum coverage is primarily based on the range and nature of medical services a plan includes. The ESRP version, conversely, is more nuanced because it addresses additional cost-sharing requirements a plan must fulfill (i.e., affordability and minimum value).
ACA Affordability vs Minimum Value
Affordability is the other half of the minimum essential coverage standard for employer-sponsored plans. Under the ACA, plans can’t be so expensive that they require employees to pay more than a certain amount of their monthly household income (9.02% in 2025). If they do, they’re considered unaffordable and therefore non-compliant.
To calculate a plan’s affordability, the IRS allows employers to use certain “safe harbors,” such as the wages reported on an employee’s W-2 form, the Federal Poverty Line (FPL), and an employee’s regular pay rate.
How Do I Check If My Employer-Based Plan Meets Minimum Value Standard Requirements?
While manual calculations are possible, the simplest way to determine if a qualified health plan meets the ACA’s minimum value requirement is to download the Centers for Medicare & Medicaid Services (CMS) Minimum Value Calculator and enter the plan’s cost-sharing information (e.g., copays, deductibles, coinsurance, etc.).
An image of the HHS’s minimum value calculation, which employers can use to determine whether their health plan meet ACA coverage standards.
Some employers, however, partner with an HR service provider to further streamline the process via comprehensive benefits administration tools that can automate benefits workflows, facilitate employee self-service for enrollments, and integrate seamlessly with payroll systems.
By leveraging such platforms, employers can reduce administrative burdens, enhance compliance with ACA insurance plan guidelines, and minimize the risk of a costly penalty or fine.
ACA Penalty for Non-Compliance
ACA reporting verifies an employer’s compliance with the minimum value (and affordability) standards. Non-compliant organizations are subject to a 4980H(b) penalty if a full-time employee enrolled in the employer’s plan becomes eligible for and/or receives a premium tax credit to the ACA’s Health Insurance Marketplace.
The employer shared responsibility payment is calculated each month there’s a violation, and employers must pay the lesser of the following two amounts:
- $2,900 for each full-time employee (minus the first 30 full-time employees); OR
- $4,350 divided by 12 ($362.50) for each employee receiving a tax credit that month
Related Glossary Terms
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