There has been so much confusion surrounding the Affordable Care Act (also known as the ACA or Obamacare) and there are so many different loopholes to investigate that it is no wonder people are left feeling overwhelmed at the very idea of purchasing a health insurance policy. One of the most confusing aspects for many people at the moment is whether large group insurance plans are required to provide coverage for their employees’ dependents.
There is also some confusion about whether people whose dependents are offered coverage under the group policy will be eligible for any subsidies or tax credits. In this post, I will help you make sense of some of the requirements and loopholes involved in the employer group insurance portion of the ACA.
Who Are Employers Required to Insure?
As it currently stands, large employers are required to provide health insurance coverage for full-time employees and their eligible children up to the age of 26. Full-time is considered anyone working over 30 hours a week. Employers have the option of providing insurance for part-time employees as well, but they are not required to.
Employers are not, however, required to extend the offer of coverage to the spouses of employees. They are also not required to provide coverage for domestic partners or the other half of a civil union (if the employee lives in a state where those living arrangements are legally recognized).
Simple enough so far, right? But wait—unfortunately it gets a little more complicated from this point on.
What If Large Group Employer Coverage Is Too Expensive?
In a couple short words, the answer to this is, “Too bad.” You have heard the words ”adjusted gross income” (AGI) bandied about, and you have heard about the federal poverty level (FPL) being raised to accommodate more working-class people. This makes it seem like everyone whose family income is less than 400 percent of the FPL will qualify for subsidized premiums or a tax credit at the end of the year.
However, this only applies if the cost of health insurance to the covered employee is over 9.5 percent of their AGI. The key words here are to the covered employee.
For example, if the entire family of four is eligible for coverage under the group health plan, it does not matter how expensive the premiums are. As long as the premium for the employee himself is less than 9.5 percent, the family will neither qualify for coverage on the health exchange nor be eligible to receive premium subsidies or a tax credit.
Is There a Way Around This?
I don’t believe there is any way to avoid having to deal with this scenario if your group health plan offers coverage to your spouse.
Since the ACA mandates coverage for dependents up to the age of 26 (as long as they are not offered coverage through their own employer), the fact that you have children does not mean that you have to enroll them in your group plan. If you are married and it is offered, though, you are required to enroll your spouse and your dependents or pay the penalty for not having coverage.
The only way out for most people is if the employer does not extend an offer of coverage to the spouse. In this case, the spouse and dependent children will then be eligible to shop for separate insurance, either on or off the health exchange.
They may then be eligible for premium subsidies or tax credits based on the family income as long as coverage for spouses is excluded from the group health plan. And this is not even a way to avoid facing this scenario—it is simply a matter of whether each individual company covers spouses or not.
What If I Can’t Afford the Premiums?
If you truly cannot afford the premiums for having your entire family covered under your group health insurance plan, there may be ways to avoid being required to purchase the insurance without facing a penalty.
You may ask for an economic hardship exemption if you have to choose between food and shelter and health insurance. Other circumstances may qualify you for this exemption as well, but you will have to prove that purchasing insurance will be harmful to your family in some way (as opposed to simply saying that it costs too much).
Before panicking about whether you can afford your insurance premiums, though, my best advice to you at this time is to talk with your employers and find out what changes they may be making to their group coverage policy. For example, one of our staff members was previously offered coverage through her spouse’s large group, but as of January 1 they will no longer be providing that coverage. This allows her family to purchase insurance and possibly qualify for a tax credit.
Once you find out whether this is going to be an issue for your family, then you can decide which way to go next. Instead of looking at the ACA as a whole and feeling overwhelmed, take the first steps before moving on to the next. You will find the task at hand much more manageable than you had previously thought.
As always, my team at HSA for America is available to you at any time, and at no cost or obligation. Our goal is to make health insurance both easy and affordable, so if you have questions or need guidance, please do not hesitate to use our services. We can be reached at 866-749-2039, and will be happy to provide whatever assistance we can.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.