Making Sense Out of Health Subsidies and Group Health Insurance

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 recent federal health cares rules reflects this fact.  Let’s take a look at what you can expect.

  • If your company offers “affordable” health insurance that meets the new (ACA) 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.
  • Then what exactly does “affordable” mean?  The ACA defines “affordable” as the cost of the coverage (premium), which should not exceed 9.5% of the employee’s income.  A nationwide outcry has occurred because the rule originally 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:

An employee with three dependents (one spouse and 2 kids) 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, the government will 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 $1,200).  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.  Also, 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.


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