Key Takeaways
- The Minimum Essential Coverage provision of the Affordable Care Act was mandated by Congress to ensure that individuals have health insurance plans with good benefits.
- You're generally covered under MEC if you have Medicare Part A, both Part A and Part B, or a Medicare Advantage Part C plan.
- Just having Medicare Part B doesn't qualify unless paired with other hospitalization insurance.
- Before 2019, you may have needed to either pay a penalty or secure an exemption if your Medicare didn’t meet MEC standards.
The ACA and MEC
The Affordable Care Act requires taxpayers to have health insurance that provides a certain level of benefits—referred to as minimum essential coverage, or MEC. If you are covered by Medicare, then you probably have minimum essential coverage.
Who's eligible for Medicare
Medicare is a government-run health insurance program for people age 65 and older, as well as disabled individuals. To qualify for Medicare at age 65, you or your spouse must have:
- worked and paid Medicare taxes for 10 years
- Medicare taxes were withheld from your wages, just like Social Security
To qualify with a disability, you must have been eligible for Social Security disability benefits for 2 years or have a condition that qualifies you for immediate benefits—Lou Gehrig's disease or permanent kidney failure, for example.
TurboTax Tip:
Congress eliminated the Minimum Essential Coverage penalty beginning in 2019.
Medicare's four parts
Medicare benefits come in four "parts":
- Part A is hospital insurance. It covers inpatient care in a hospital or skilled nursing facility, as well as hospice care and some in-home care.
- Part B is medical insurance. It covers doctor visits, outpatient procedures, medical supplies and preventive care.
- Part C is "Medicare Advantage." These are health plans offered by private insurance companies that have a contract with Medicare to provide services. When you enroll in a Medicare Advantage plan, the insurer takes care of your Part A and Part B benefits.
- Part D is optional prescription drug coverage
What you have to do
You have minimum essential coverage if you have any of the following:
- Part A coverage
- both Part A and Part B coverage
- a Medicare Advantage Part C plan
This is the case for the vast majority of people on Medicare. You don't need to do anything special to avoid the penalty.
You don’t have minimum essential coverage if you have:
- Part B by itself
If you have only Part B and don't have other coverage that provides hospitalization insurance, you must either pay the penalty or obtain an exemption. TurboTax Health's Exemption Check can help you figure out whether you qualify for an exemption.
Paying the penalty, if necessary
For tax years prior to 2019, if you don't have minimum essential coverage and don't qualify for an exemption, you might have to pay the penalty when you file your income taxes. The official name for the penalty is the "individual shared responsibility payment."
How much you have to pay depends on several factors:
- the number of people in your household who were uninsured
- the number of months out of the year they were uninsured
- and your household income
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