Affordable Healthcare – Families off Employer Coverage

Is the cost of Family health insurance on your Employer Health Insurance unaffordable? As of 1/1/2023, it may make sense to move them off your employer insurance and on to the ACA Individual Marketplace.  You could save thousands on your average health insurance costs and get affordable healthcare.

In this guide, you’ll find everything you need to know to determine if moving your family off your employer health insurance makes sense.  It’s as simple as 2 numbers and a date:

  • Contact your company’s HR department for your employer health insurance costs
    • 1st number – What is the employee contribution for the lowest dependent or family plan?
    • 2nd number – What is the employee contribution for the lowest employee only plan?
    • Date – When can I remove myself or my dependents from my Employer plan if I get other qualified health insurance? 

How to quickly determine if switching makes sense:

  •  Step 1 – Once you receive information back from your HR department, add a 0 to the cost to cover your dependents or family on your employer plan
    • For example, if the monthly premium to cover your family is $1,200, your base number is $120,000
  •  Step 2 – Determine if your health insurance is affordable based on the new rules for 1/1/2023.  This is simple – If your total adjusted household income is the same OR lower that your base number you WILL now be eligible for premium tax credits on the Individual ACA Marketplace (Obamacare).  
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Family Health Insurance

The Basics – What is Affordable Healthcare?

  • 9.12%  The A in Affordable Healthcare Act is the calculation that determines if your health insurance is affordable.  Simply stated, if the cost of your monthly premiums is more than 9.12% of your total adjusted income then your insurance is not affordable.  There are tax credits available on the ACA Marketplace to offset the costs of your monthly premiums.
    1. Notes 
      1. You must file a federal income tax each year to receive the tax credits
      2. If you are married, you must file jointly to receive the tax credits
      3. The amount of tax credits you receive is based on the federal poverty level
      4. You project your income each year and when you file your federal taxes the next year, you reconcile your income and tax credits
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Fix to the Family Glitch

The Basics – What is the Family Glitch?

  • The Family Glitch is a rule in the ACA.  If you are on an Employer sponsored health insurance plan, the employer contribution towards your premiums MAKES the plan affordable.   This impacts both Small business employee health insurance and overall Health insurance costs.
  • What was the Glitch?   Let’s look at a common example
    1. Beth and her family are covered through her employer’s health insurance plan
    2. Beth’s total adjusted household income is $85,000 per year
    3. Beth’s employer pays 50% of her premium and she contributes the rest for her and her family
    4. The cost for employer + family on her employer plan is $1,200 per month
    5. Her annual contribution for her family’s health insurance is $14,400 ($1,200*12).   The percentage of her income that goes towards her health insurance is 16.9% ($14,400/$85,000)
    6. She is well over the 9.12%!  BUT since works for an employer that offers a qualified health plan, she and her family ARE NOT eligible for tax credits on the ACA Marketplace

The Basics – What is the Fix?  How can Beth lower her health insurance costs for her family?

  • Easy!  She follows the MCC Insurance 2 numbers and a date rule
    1. Number 1 – $1,200.   The employee contribution to add her family to the lowest plan her company offers
    2. Number 2 – $250.   The employee contribution if she remove her family and simply covers herself as the employee
    3. Date – 30 days.  Her employer’s plan allows for employees or dependents to be removed from the plan with a 30 day notice
  • Who is eligible for tax credits?
    1. The Marketplace will have two calculations
      1. Beth – By herself on her employer plan, she has affordable health insurance.  ($250*12 = $3,000.   $3,000/$85,000 is 3.5%.)  Well below the 9.12% standard
      2. Her family – They have unaffordable insurance.  (Their monthly premiums are $950 per month {$1,200 total minus Beth}, which is $11,400 per year).  That is 13.4% ($11,400/$85,000) and significantly above the 9.12% standard.

Her family can now shop the ACA Marketplace to find a plan and leverage tax credits.  They may find better options for Health insurance plans for families.

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Health Insurance

Common FAQ’s:

  • What if my income level makes my family insurance affordable on my Group Insurance plan?  Answer – You can stay on your current group insurance.  There will not be tax credits available on the marketplace for you.
  • What if my employer’s plan does not allow me or my family to be removed until the next open enrollment?  Answer – You will need to wait for the next open enrollment for your company.
  • When can I make a change and remove my dependents off my group plan?  Answer – Assuming your company’s plan allows, the new rules for affordability begin 1/1/2023.  
  • When does open enrollment begin for the ACA Marketplace?  Answer – 11/1/2022.  Applications taken from 11/1 to 12/15 have a 1/1/2023 effective date.  Applications taken from 12/16/2022 to 1/15/2023 have a 2/1/2023 effective date.   Open enrollment ends on 1/15/2023.
  • Can I move to the ACA Marketplace with my family (if my Group plan allows)?  Answer – Yes.  Many people will want the entire family on one plan.  Note, the tax credits will only be calculated (if applicable) for your family.  In most cases, the employee will have affordable coverage considering what the employer contributes.

I have never used the ACA Marketplace.  Where can I get help?