CMS Definition of Health Insurance
The Centers for Medicare & Medicaid Services (CMS) defines health insurance as a contract between an individual and a health insurer in which the insurer agrees to pay for some or all of the individual's healthcare costs in exchange for a premium. Under the Affordable Care Act (ACA), CMS and HHS further define what qualifies as valid health coverage.
Minimum Essential Coverage (MEC)
Under the ACA, individuals are expected to have Minimum Essential Coverage, which includes:
- Employer-sponsored plans (including COBRA and retiree coverage)
- Individual market plans (including ACA marketplace plans)
- Medicare Part A or Medicare Advantage
- Medicaid
- CHIP
- TRICARE
- VA health coverage
- Peace Corps volunteer coverage
- Self-funded employer plans
Plans that do not qualify as MEC include short-term limited-duration plans, fixed indemnity plans, and healthcare sharing ministries.
CMS Program Categories
CMS categorizes insurance programs into distinct groupings:
| Category | Examples | Regulation |
|---|---|---|
| Medicare | Original Medicare (A/B), Medicare Advantage (C), Part D | Federally administered by CMS |
| Medicaid | State Medicaid programs, managed Medicaid plans | State-administered with federal CMS oversight |
| CHIP | Separate CHIP or Medicaid-expansion CHIP | State-administered with federal CMS oversight |
| Marketplace (QHP) | Silver, Gold, Bronze, Platinum plans on Healthcare.gov | CMS/state exchange oversight |
| Employer-Sponsored | Fully-insured and self-funded group plans | ERISA (DOL) for self-funded; state regulation for fully-insured |
Essential Health Benefits (EHBs)
ACA-compliant individual and small-group plans must cover 10 essential health benefit categories:
- Ambulatory patient services (outpatient care)
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services
- Prescription drugs
- Rehabilitative and habilitative services
- Laboratory services
- Preventive and wellness services
- Pediatric services (including dental and vision)
State Insurance Commissioners
Each state has a Department of Insurance (DOI) led by an insurance commissioner who:
- Reviews and approves insurance rates and plan designs
- Licenses insurance companies operating in the state
- Handles consumer complaints and enforces regulations
- Monitors insurer financial solvency
- Coordinates with CMS on marketplace plan certification
