Employees and the Individual Marketplace


Individual Health Insurance Alternatives for Employees

 

The federal health law introduced a beneficial resource for consumers with the health insurance marketplace. Because of this cost-effective addition to the individual market, uninsured Americans now have more options than gambling with their health or moving to a state with a public health insurance program.

Additionally, those who have employer coverage but can’t afford it also have more choices on the health insurance exchange. However, the law defines what’s affordable, rather than allowing employees to freely opt-out of their group health plans.

The cost of group health insurance has been rising over the years with medical inflation, health reform taxes, and general insurance inflation. Under health reform, employer-sponsored plans can no longer increase the group’s overall premiums based on health status, which also caused rates to increase.

If you work for a company that offers coverage, you may find now that the lack of medical underwriting in the individual market makes group coverage less valuable — especially if the group premium is higher than what you would pay for your own plan.

As health status, gender, occupation and other factors aren’t considered when you apply for individual coverage, it’s much less intimidating to apply for a plan on or off the exchange. Many workers could still get stuck with premiums they can’t afford either way, but the Affordable Care Act includes a provision intending to help those with less than minimum value.

 

Minimum Value Requirements

Although the requirement for employers to offer coverage has yet to kick in, the same rules apply for workers applying for insurance on the marketplace. The ACA established this standard for the most basic plan, and it’s demonstrated similarlyon the bronze level of the exchange for individual plans.

  • 60 percent actuarial value
  • Maximum out of pocket: $6,350 single, $12,700 family
  • Employees spend less than 9.5% of their wages on coverage (group plans only)

 

Minimum value under the health law means the plan sponsor covers at least 60 percent of total estimated costs for the year. If the plan falls short of this requirement, employees are eligible for subsidies on the marketplace.

 

If the plan sponsor, either the employer or insurer, pays 60 percent or more for each worker’s policy, they:

  • Meet the guidelines for the ACA’s Employer Mandate
  • Disqualify workers from receiving tax credits, regardless of income

 

The health law also defines group plans as unaffordable if they exceed 9.5 percent of the employee’s W-2 income.

 

Federal law required all employers covered by the Fair Labor Standards Act to inform workers of their new coverage options by October 1, 2013, when the marketplace opened, in a written notice. However, there was no penalty for failing to provide the notice. The U.S. Department of Labor provided model notices for employers who provide coverage and those who do not.

The notices had to state that depending on their income and what insurance is available to them, workers may qualify for reduced-cost coverage on the exchange. It also had to be explained that if an employee did enroll in the marketplace, they would lose their employer’s premium contribution, if any.

For some workers, the exchanges are less expensive than a group plan with an employer contribution — even if the plan does meet minimum value guidelines.

 

If your employer does not offer coverage or if you’re self-employed, you may be eligible for subsidies on the marketplace depending on how much you earn.

 

Resources

 

Compare Individual Health Plans

Learn about the Affordable Care Act

Calculate your Subsidy