insurance

Minimum Value (Insurance)

A standard used primarily in health insurance to determine if an employer-sponsored plan provides sufficient coverage to meet legal requirements. Under the Affordable Care Act, a health plan meets minimum value if it covers at least 60% of the total allowed costs of benefits and includes substantial coverage for physician and hospital services.

Example

“The company's health insurance plan meets minimum value requirements by covering 62% of medical costs and including comprehensive physician and hospital benefits.”

Memory Tip

Think 'Minimum Value = 60%' - like getting a D- grade, it's the bare minimum passing score for employer health plans.

Why It Matters

Employees need to understand minimum value because if their employer's plan doesn't meet this standard, they may be eligible for premium tax credits when buying insurance through the marketplace. This could save thousands of dollars annually and provide access to better coverage options than their employer offers.

Common Misconception

Many people assume that if their employer offers health insurance, it automatically meets all legal standards and provides good coverage. However, some employer plans may not meet minimum value requirements, meaning employees might qualify for better, subsidized coverage through the health insurance marketplace instead of accepting their employer's inadequate plan.

In Practice

Sarah's employer offers a health plan that only covers 45% of medical costs and excludes hospital coverage, failing the minimum value test. Because the plan doesn't meet minimum value, Sarah qualifies for premium tax credits on the marketplace. She finds a plan that covers 70% of costs for $300/month, but with a $200/month tax credit, she pays only $100/month for much better coverage than her employer offered.

Etymology

This term emerged from the Affordable Care Act of 2010, combining 'minimum' from the Latin 'minimus' meaning 'smallest' and 'value' from the Latin 'valere' meaning 'to be worth,' establishing the lowest acceptable coverage standards.

Common Misspellings

minumum valueminimum valuminimun valueminimum vlaue

More in insurance

Other insurance terms you should know

deductibleThe amount you pay out-of-pocket before your insurance begin…insurance premiumThe amount paid periodically to an insurance company in exch…deductibleThe amount a policyholder must pay out of pocket before insu…copayA fixed amount paid by an insured person at the time of a me…coinsuranceA cost-sharing arrangement where the insured pays a percenta…out-of-pocket maximumThe most an insured person will pay for covered healthcare s…