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What is the Individual Mandate and how does it link with MEC?

The ACA mandates are nothing short of confusing. Here we take a look at the Individual Mandate and how Minimum Essential Coverage (MEC) is linked to it.

In 2014, the ACA introduced what is referred to as the "Individual Mandate". In short, this law states that the vast majority of people who pay taxes in the US are required to have health insurance that meets Minimum Essential Coverage (MEC) requirements. If you do not have the required insurance coverage, you will pay a fine unless you meet the exemption requirements.

Another way to think of the ACA is the Individual Mandate is the law that states the level of health insurance US tax paying residents are required to have and MEC plans are what satisfy this law and ensure you won't have to pay a fine. In some cases, especially on different American Government websites, MEC is also referred to as  'qualifying health coverage"   

 

Who must acquire MEC?

As a general rule of thumb, if you are required to pay taxes in the US, you are also required to secure and prove you have secured the essential coverage for not only yourself but also any dependants you include on your US tax return.

Of course, there are certain situations where both inbound and outbound expats will not be required to secure MEC. Visit our exemptions page to learn more about who is required to secure MEC plans and who is exempt from paying.

One important thing to stress here is that the Individual Mandate does not only just apply to American citizens, this also applies to residents and landed aliens with visas. For example, if you are a resident who doesn't live in the US. but still maintains a visa or Green Card you are still legally required to prove that you have compliant coverage when you file US taxes. Luckily, there are clear-cut rules around this, view them here.    

 

How long do you have to have MEC?

The ACA mandate states that all taxpayers except those who are exempt from securing MEC are supposed to have coverage in place for an entire calendar year. One interesting thing to note here is that as long as you have qualified coverage in place for one day of each month, then you are deemed to have met the MEC requirements. 

When it comes to expats coming into the US, you are going to need to have health insurance that meets MEC requirements in place pretty much from the month you are classified as a US tax resident. In most cases, this happens as soon as you are issued the relevant visa. For example, if you receive your Green Card in June 2017, you will be deemed a tax resident of the US from June, and will, therefore, need to prove you have an ACA-compliant plan for that year.

For expats leaving the US, unless you meet the exemption status explained here, you will be required to prove that you have MEC for the entire year. This also goes for any expats who are not US citizens but have eligible visas and who are leaving the US. You will still be required to prove MEC coverage for the entire year, as long as you remain a US taxpayer and meet the eligibility requirements.   

 

What qualifies as MEC?

There are a surprising number of health insurance plans available, but not every plan meets the requirements of the MEC. The compliant plans available to taxpaying residents of the US are can be divided into four sections and include:

 
 

US govt icon

Employer icon

Individual icon

HHS Icon

Government Sponsored Plans

Employer Sponsored Insurance

Individual plans

Plans approved by the Department of Health & Human Services (HHS)

Medicare Part A, and Medicare Advantage programs

Group health insurance policies including:

  • Plans offered to government employees.

  • Plans offered to employees that are regulated by the state.

  • Grandfathered group health insurance plans

Private health insurance purchased from an ACA-compliant health insurance provider

Medicare Part C

 

Medicaid plans

Self insured group health plans for employees

US-based coverage purchased on state marketplaces

Health insurance plans offered by providers NOT based in the US who have received approval by the HHS to sell a plan. These plans MUST comply with nearly all ACA benefits and will usually be underwritten in the US.

 

 
 

Children Health Insurance Program coverage

Group-based retiree coverage

Most student health plans

Military plans including TRICARE and health programs offered by the Department of Veterans Affairs

Expat plans issued in the US that meet Expatriate Health Coverage Clarification Act requirements

Catastrophic plans for people under 30.

Coverage offered to volunteers of the Peace Corps

Expatriate health insurance plans sold in the US for non-employees.

Refugee Medical Assistance

Basic Health Program health plan coverage

 

What does not qualify as MEC?

 

No glasses

No travel

No globe

Plans that only cover expected benefits: :

Non medical plans

Non-US plans

Dental plans

Plans that cover only travel

Plans that are underwritten outside of the US

Vision plans

Medical benefits that are part of homeowner or auto policies

Home country universal or national health insurance schemes

Pharmacy plans

Pharmacy discount plans

Employee assistance plans

Critical illness and accident plans

Limited duration plans

 

How do I report having MEC?

Reporting of having qualified health insurance (MEC) is done each year via your income taxes. This is usually done by simply ticking a box on your relevant 1040 (available here). For example, most individuals will fill out the basic 1040 form (U.S. Individual Tax Return). If you have had MEC for the entire year, you will simply tick the 'Full-year coverage' box on line 61.

When filling out your return you will need information from Form 1095B. This form is provided to you by your insurer by the end of January each year and provides useful information that can be used to first determine whether you have had MEC for the entire year, or you will need to pay a fine. Bear in mind here, that you are not usually required to submit this form but you should keep it for at least three years should you be audited.  

 

What happens if I am not compliant?

If you have not had MEC in place for the entire year, you will likely have to pay a penalty on your tax return. View our section on penalties to learn more about how these work.

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