How to calculate minimum value standard for health insurance?


Editorial team Published on

An employer-sponsored health plan meets the Affordable Care Act (ACA) Minimum Value (MV) standard if it is designed to pay at least 60% of the total allowed cost of benefits for a standard population, and it includes substantial coverage for physician and inpatient hospital services.

How the Calculation and Determination Work

Employers cannot simply guess this percentage; they must use specific methods approved by the Department of Health and Human Services (HHS) and the IRS:

  1. The HHS Minimum Value Calculator:
    • For plans with standard features, employers plug plan parameters—such as deductibles, copayments, coinsurance, and out-of-pocket maximums—into the official HHS Minimum Value Calculator.
    • The tool outputs whether the plan's share of total allowed costs hits or exceeds the 60% threshold.
  2. Design-Based Safe Harbors:
    • HHS and the IRS established specific "safe harbor" plan designs. If a plan matches one of these pre-approved structural templates, it automatically satisfies the minimum value standard without needing a custom calculation.
  3. Actuarial Certification:
    • If a health plan contains nonstandard features (such as unique quantitative limits on benefits that the HHS calculator cannot properly evaluate), the employer must hire a member of the American Academy of Actuaries to provide an actuarial certification proving the plan covers at least 60% of total allowed costs.

Core Requirements Beyond the 60% Math

To officially pass the Minimum Value test, the plan must also include:

  • Substantial physician coverage (e.g., doctor office visits).
  • Substantial inpatient hospital services (e.g., room, board, and surgeon care).
  • (Note: Under IRS guidance like Notice 2014-69, plans failing to substantially cover inpatient hospitalization or physician services do not meet minimum value regardless of the percentage math).

How to Check if Your Plan Qualifies

  • If you are an employee: You do not have to calculate this yourself. You can ask your employer’s Human Resources or benefits department if your plan meets the ACA Minimum Value Standard, or ask them to complete the Employer Coverage Tool form required by the Health Insurance Marketplace.