Affordable Employer Sponsored Health Insurance
Covered California eligibility for a health plan with a subsidy or tax credit is dependent upon several factors; one of which you are not offered group health insurance through an employer that is considered affordable with minimum value standard.
Most employer sponsored health plans meet the criteria for being affordable, but if they don’t, then you may qualify for a subsidy through Covered California.
1. Is it affordable?
If the employee-only rate for the cheapest plan at work costs less than 9.66% of your total household income then it’s considered affordable.
Unfortunately, the affordability is based upon the individual rate and not that for a family. This is referred to as the Affordable Care Act Family Glitch.
2. Is it minimum value standard?
Minimum value standard is a health plan that is designed to pay at least 60% of the total cost of medical services for a standard population, and if its benefits include substantial coverage of hospital and doctor services. Most job-based health plans meet these criteria.
Susan and Tommy are married and have 3 children. Their combined income is $70,000. Susan works for a CPA firm and is offered health insurance for herself and her family. Tommy is self-employed, so isn’t offered insurance. Susan’s work offers 3 health plans. She decides to enroll her family on the cheapest plan. If she was enrolling herself only, the premium would’ve been $150 a month. But for her family, the cost was $853 a month. Ouch! It’s expensive, but they bite the bullet. A neighbor tells Susan about getting cheaper health insurance through Covered California, and encourages her to check it out.
Here’s how Covered California will determine if they qualify for a subsidized Covered California plan:
$70,000 Annual Income
$6,762 This is the premium threshold that Covered California considers as affordable for Susan’s family.
$150 Susan’s share of the work premium for herself only
x 12 Twelve months in a year*
$1,800 Susan’s Annual Premium for the Work Insurance
Since the work insurance is less than the Covered California premium threshold, the work plan is considered “affordable” by Obama Care standards, which makes her whole family automatically not eligible for a subsidy.
However, Susan does find out that their income of $70,000 does qualify her 3 children that are under 19 years old for the Medi-Cal program. No doubt it would definitely lower the health insurance premium at Susan’s work if they removed the kids and enrolled them with Medi-Cal.
Jack was unemployed in the months of January and February. In March he was hired by a marketing company. He met his 60 day probationary period, and is now eligible for health, dental and vision benefits that would cost him $250 out of his paycheck every month. Last year, he was insured under Covered California and he qualified for a premium savings, so he wants to see if he is still eligible for it. To determine if he still qualifies for a subsidized Covered California plan, Jack will need to find out if his job-based insurance is considered affordable by Covered California. Remember, the magic number is 9.66%. If the premium for his job-based insurance is more than 9.66% of his annual income, then, Jack may qualify for a Covered California plan with a subsidy. Jack needs to collect the following information:
- Are the health plans at work “minimum-value?” He finds out that they are.
- How much would it cost him out of his paycheck every month if he were enrolled on the cheapest health plan (excluding dental and vision) offered? He finds out it would be $201.
- He also needs to estimate his annual gross income adding the unemployment he received from the state in January and February to the pay from his new job. He estimates an annual income of $24,000.
Here’s how Covered California will determine if Jack qualifies for a subsidized Covered California plan:
$24,000.00 Annual Income
$2,318.40 This is the premium threshold that Covered California considers as affordable for Jack.
$201.00 Jack’s share of the work premium per month
x 12 Twelve months in a year*
$2,412.00 Jack’s Annual Premium for the Work Insurance
The math tells Jack that his work insurance premium would be more than 9.66% of his annual income. Good News! This means he would potentially qualify for a Covered California plan with premium savings.
Employer Coverage Tool
The Federal exchange, healthcare.gov offers a useful form that you can print and give to your employer to fill out that can help determine the affordability of your plan at work.
Common Questions and Exceptions:
We understand it can be confusing. Give us a call at 1-877-752-4737 to have a licensed health insurance agent review your personal situation.
*Even though the individual or family was only eligible for group insurance mid-year, the calculations must be based on the annual premium for the full plan year. For details, see IRS Publication 974-Premium Tax Credit https://www.irs.gov/pub/irs-pdf/p974.pdf.