Minimum Essential Coverage vs Minimum Value: What Employers Need to Know
Two ACA terms decide whether an employer’s health plan satisfies the employer mandate: minimum essential coverage and minimum value. They sound alike and test different things. This guide explains each, how they connect to affordability, and what happens if a plan falls short.
What each term measures
Minimum Essential Coverage
The type of coverage that counts at all. Most employer group health plans qualify, but the offer must reach enough full-time employees.
Minimum Value
A measure of how generous the plan is. It must pay at least 60 percent of the total allowed cost of covered benefits.
Affordability
A cost test on what the employee pays for self-only coverage. It applies only when the plan offers minimum value.
How the tests compare
| Test | Question It Answers | Who It Applies To |
|---|---|---|
| Minimum essential coverage | Is this the kind of coverage that counts? | Applicable large employers offering coverage |
| Minimum value | Does the plan pay enough of the cost? | Applicable large employers testing a plan |
| Affordability | Can the employee afford the self-only price? | Applicable large employers testing a plan |
The percentage thresholds
For plan years beginning in 2026 the affordability threshold is 9.96 percent and for 2027 it is 10.22 percent of household income. Employers use safe harbors because household income is unknown.
W-2 Safe Harbor
Compares the employee price with wages reported in box 1 of the W-2.
Rate of Pay Safe Harbor
Compares the employee price with the hourly rate of pay times a standard month.
Federal Poverty Line Safe Harbor
Compares the employee price with a share of the federal poverty line.
What can happen
Not Offering Coverage Broadly
An employer that does not offer coverage to enough full-time employees can owe a penalty if any receive premium tax credits.
Offering Coverage That Misses a Test
An employer offering coverage that lacks minimum value or is not affordable can owe a different penalty per affected employee.
Fixing It Before Year End
Review the plan design and employee prices each renewal so a miss is caught early.
Questions we get
Is minimum value the same as minimum essential coverage?
No. Minimum essential coverage is about the type of plan. Minimum value is about how much of the cost the plan pays.
What percentage must a plan cover to have minimum value?
At least 60 percent of the total allowed cost of benefits.
Does this apply to every employer?
The employer mandate applies to applicable large employers, generally those with fifty or more full-time and equivalent employees.
Where do I check a plan’s minimum value?
The carrier can confirm it, and there is a government calculator for plans that are not standard.
What if my plan has high deductibles?
It can still have minimum value. The test is the share of costs the plan pays, so check with the carrier.
Can CFH check our plan?
Yes. CFH Insurance Consultants can review plan designs against these tests. Send us the renewal.
The law behind this page.
Internal Revenue Code section 4980H, shared responsibility for employers; section 36B(c)(2)(C), minimum value and affordability; IRS Revenue Procedure 2026-26, 2027 affordability percentage.
Related guides.
What Is an Applicable Large Employer
The fifty-employee threshold explained.
ICHRA Affordability for 2027
How affordability works for ICHRA.
ACA Reporting
Forms and deadlines.
What Is Form 1095-C
The annual ACA reporting form.
What Is Form 1094-C
The transmittal form.
Compliance Services
Filings, notices and testing.
Related reading: Who counts as a full-time employee · EE, ES, EC and EF coverage tiers
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →
Cookies on This Site
We use cookies to keep the site working properly and to understand how it is used. You can decline anything that is not essential. See our Privacy Policy for the detail.
- Essential: needed for the site to load and for you to move around it. These cannot be switched off.
- Analytics: tell us which pages get read, so we know what is worth writing more of.
- Advertising: set by third parties such as ad and social platforms to measure and target campaigns.