Health Subsidies and Employees or Dependents offered Group health insurance

HHS released final notes on rules regarding how the term "affordable" would be viewed with group health insurance there's a big impact on the health subsidy that may be available to individuals (employees or their dependents).  Keep in mind that the ACA health reform subsidy is available to eligible individuals and families on the Individual market.   What if you have group health coverage through your employer or if you decline to accept group health coverage that's offered (say due to contribution levels that you cannot afford).  This is a big deal and the outcry to the recent rule reflects this fact.  Let's take a look at what you can expect.

Employees offered group health and subsidies

There are a few key points to make for employees offered group health insurance.  If your company offers "affordable" health insurance that meets the new basic plan requirements, you are not eligible for a health subsidy nor are your dependents.   This is a huge deal since the group health insurance rates are expected to go up from an already high level.  What exactly does affordable mean?  The ACA definition of affordable is that the cost of the coverage (premium) should not exceed 9.5% of the employee's income.  The outcry occurred because the rule stipulated that this 9.5% threshold would only look at the employee's income/cost of coverage...not the cost to cover dependents.  That's a big difference.

An example reflecting the new rule's impact

For example, let's say you have an employee with three dependents (one spouse and 2 kids).  Let's say this person makes $40K per year.  The employee cost may be $400 per month but the dependent cost could easily run another $800.  In determining if the coverage is affordable, they'll look at just the employee's $400 premium versus annual income of $50K which meets the affordability requirement even though the family's real monthly premium is $1200.  It's not uncommon for companies to pay for employee coverage and not dependents (or paying a smaller percentage/amount towards dependents)  which is allowed.  This is a gap in the current law which probably won't be addressed due to the political climate.  Further more, since the dependents were offered coverage through the employer, as the law is interpreted, they will not qualify for subsidies on the individual market.  We're still waiting for additional clarification and detail regarding this issue.

Is Group health insurance going away?

One big concern is that many companies, especially those with employees that do not make much will drop their group health insurance and just pay the annual premium of $2K.  The requirement to offer coverage or pay the premium only applies to companies with 50 or more equivalent full time employees.  This basically means 1500 hours weekly (30 hours a week x 50 employees).  You could also get there with 100 part time employees working 15 hours weekly (the 50 equivalence).  Since group health insurance will be much higher than $2K for many employees, you may see some pay the penalty.  The penalty does not apply to companies with less than 50 full time equivalent employees which is interesting since so much of the U.S. employment is actually at smaller firms.  If those small companies do not offer coverage, the employees could possibly qualify for a subsidy on the individual family market.  As we get more information affecting employees and health subsidy eligibility, we'll make sure to add it the site.




Los Angeles, Family of 4
making $60K.

Iowa, Single Adult making $30K

*Based on age, expected costs, and other assumptions according to Kaiser Calculator.  Actual subsidies will vary and official subsidy amounts will be available Oct 1st, 2013. 

Health Subsidy Calculator



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