Family eligibility for tax credits if you are eligible to enroll in a job-based plan

We have been getting a lot of questions from families where the employer does offer family coverage, but it is often too expensive. Because the employer plan is too expensive, many families are looking to shop in the Healthcare Marketplace (www.healthcare.gov). Even though they are eligible to purchase a plan they are often not eligible for tax credits unless the employee only cost (not the family cost) is more than 9.5% of the family income . This is why some companies are looking at dropping their family coverage. They are starting to recognize that there plans are too expensive for family members and know that families can often get a much better deal through the marketplace if they are eligible for tax credits. If you are one of these families, I encourage you to talk with your employer and see if it is an option to not cover families. Below is some guidance from CMS on the specifics:

Q: Are families eligible for Marketplace tax credits if they are eligible to enroll in a job-based plan that is offered to an employed family member?

A: As explained in greater detail below, the answer depends on whether the job-based plan is considered “affordable” and meets “minimum value.” Employers that offer job-based health coverage for an employee’s family members usually, but not always, pay part of the family’s premiums. If a family chooses an individual health insurance Marketplace plan instead, the employer doesn’t contribute to premiums. Consumers should consider this carefully before comparing Marketplace plans. If a consumer with an offer of employer-sponsored family health coverage decides to shop for Marketplace plans for his or her family, be aware that he or she may not qualify for tax credits (and cost-sharing reductions), even if their household income would otherwise qualify them for financial assistance.

Whether a consumer and/or the consumer’s family members will qualify for tax credits based on income will depend on the coverage the employer offers. A consumer and/or family member won’t be able to get lower costs if the job-based coverage is considered affordable and meets minimum value.

What is considered “affordable?”
A job-based health plan is considered “affordable” if the employee’s share of premiums for the lowest cost self-only coverage that meets the minimum value standard is less than 9.5% of their family’s income.

In other words, if a consumer’s share of premiums for a plan that covers only that person (as the employee)–not his or her family–is less than 9.5% of the family’s income, the plan is considered affordable.

The consumer may pay more than 9.5% of his or her family’s income on premiums for spouse or family coverage from the job-based plan. But affordability is determined only by the amount the employee would pay for self-only coverage from the employer.

For more information, please refer to https://www.healthcare.gov/what-if-i-have-job-based-health-insurance/.

What is the “minimum value” standard?
A health plan meets the minimum value standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population.  In other words, in most cases the plan will cover 60% of the covered medical costs and the person with coverage pays 40%.

A consumer should ask his or her employer for help figuring out if the plan offered meets the minimum value standard. The employer can also give the information needed to determine if the plan is considered affordable.

One way to gather this information is by asking the employer to fill out an Employer Coverage Tool (available here).

 

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