Information to help families determine if employer-sponsored health insurance is better than subsidized coverage through Covered California.
The Center for Medicare & Medicaid Services (CMS) has released a review of the rules regarding when a family becomes ineligible for the Covered California subsidy after being offered employer-sponsored health insurance. While the presentation is geared toward health insurance agents, there is good information relevant to everyone in the file. As CMS notes, gaining employer-sponsored health insurance while enrolled in Covered California is a Common Complex Situation.
There are many variables and potential financial impacts when choosing between an individual and family plan through Covered California or employer-sponsored health insurance. Consequently, families must crunch some numbers to see if they still might be eligible for Covered California subsidy versus the employer plan.
Determining if Employer’s Coverage Offer is Affordable
- Agents and brokers will need to determine if the lowest cost plan offered for employee-only coverage that also meets the MV standard is “affordable.”
- Employer coverage is considered affordable if the employee’s share of the annual premium for the lowest cost employee-only plan is no greater than 9.66% of annual household income.
- The affordability test only considers the cost of the employee-only coverage; the cost of family coverage (i.e., the cost of insurance for both Samson and his family) is not considered for the affordability test.
- In this scenario, Samson’s annual household income is $37,000. If an employer offers multiple health care coverage options, the affordability test applies to the lowest cost option available to the employee only that also meets the MV requirement.
- To be affordable, Samson’s share of the lowest cost employer-sponsored plan covering Samson only (not his wife or child) cannot be more than 9.66% of Samson’s annual household income or $3,574 in annual premiums or approximately $298 per month.
– Note that even though the affordability test looks only at the cost of the lowest cost self-only plan available to Samson, if the coverage is considered to be “affordable” for Samson, then the other family members would also be considered to have an offer of “affordable” coverage for purposes of determining eligibility for financial assistance through the Marketplaces. – Page 10
It’s also important to determine if the employer coverage meets minimum value (MV). If it doesn’t, then the family may still be eligible for the subsidies through the exchange. The Summary of Benefits for the employer plan and the Human Resources department for the employer should be have the MV information.
To help consumers determine whether their offer of employer-sponsored coverage is affordable and meets the MV standard, employees should ask their employers (or human resources departments) to fill out the “Employer Coverage Tool” worksheet.
An individual or family can still remain in their Covered California health plan, but if they are offered MV insurance that is affordable, they will be ineligible for the tax credit subsidy of Covered California.
The CMS presentation also covers mandatory waiting periods associated with employer-sponsored coverage and mixed households where the children may be on Medi-Cal. Download the full PDF version of the presentation below.
