Can you get Covered CA Subsidies if your
Employer offers “Affordable Health Coverage?”
“Family Glitch”

If you are offered affordable health coverage (FREE Quotes) and it has “minimum value [Bronze 60%]” under an employer plan, that is less than 9.86% of income for employee ONLY  (CFR 1.36 B 2 * ThomsonReuters  * Revenue Procedure 2018-34Revenue Procedure 2014-62) neither you or your family qualifies for the APTC Advance Premium Tax Credit-subsidy from Covered CA, Health Care.Gov or any exchange. Covered CA FAQ  

It doesn’t matter if covering your whole family coverage would go over the 9.86% limit.  That just the way the law and rulings work.  Some call this the “Family Glitch.”  See below for details and explanations.

Any fix, for instance, would likely involve changing the eligibility calculation for marketplace subsidies — pegging the affordability standard to the coverage cost of the whole family rather than just an individual’s coverage. Doing so would increase federal spending by about $9 billion or $10 billion, since many more people would qualify for subsidies. CA Health Line *

Note that if rates increase or employer contribution lowers, that may trigger a special enrollment period, rather than wait for open enrollment.

See also the 8% rule if you want an exemption from the individual mandate or permission to get a catastrophic – minimum coverage plan.

Cal Choice Premium Affordability Calculator

New rule about HRA’s – Employer Heatlh Reimbursement Accounts. Section 106 Deduction for employer provided coverage?

affordabilty.9.5.percent
Affordability 9.5% of employee ONLY share of premium – NOT family

What about adult children under 26?

Adult child up to age 26 are eligible for Coverage through their parents employers plan.  However if they are  paying their own taxes, they are not anyone’s tax  dependent, they do not count towards  household income, – MAGI.   Then the adult children could qualify for their own coverage in Covered CA.

Learn More⇒  Kaiser Health News 11.8.2013

Citations & Details

Example 2. Basic determination of affordability for a related individual. The facts are the same as in Example 1, except that C is married to J and X’s plan requires C to contribute $5,300 for coverage for C and J for 2014 (11.3 percent of C’s household income). Because C’s required contribution for self-only coverage ($3,450) does not exceed 9.5 percent of household income, under paragraph (c)(3)(v)(A)( 2 ) of this section, X’s plan is affordable for C and J, and C and J are eligible for minimum essential coverage for all months in 2014 CFR §1.36 B 2 Eligibility for Premium Tax Credit

However, the cost of a family plan is often higher, but the ruling means that those higher costs will not be considered even if the extra premiums push the cost of coverage above the 9.5% income threshold. The New York Times said this could leave 2–4 million Americans unable to afford family coverage under their employers’ plans and ineligible for subsidies to buy coverage elsewhere.[136][137]  Wikipedia

Alternatives – Solutions?

One possible solution to the Family Issue would be to have the Employer get a program thru the SHOP exchange, exclude dependents, then they are NOT eligible and can then select “None of the Above” and get subsidies based on household income.

Insure Me Kevin.com Explanation 9.29.2015

Self Employed Health Care Deduction?

 

questions.about.employer.affordability
Covered CA Questions on Employer Provided Coverage – Concerning 9.5% rule
8perscent.affordable
Questions About 8% Rule and possible Exemption from Mandated Health Insurance

More Explanation

Under the law, those workers whose employers offer “affordable coverage” will not be eligible for subsidies in the exchanges. To be eligible, per the law’s definition, the cost of employer-based health insurance must exceed 9.5% of the worker’s household income. In January 2013 the Internal Revenue Service (CFR 1.36 B 2) ruled that only the cost of covering the individual employee would be considered in determining whether the cost of coverage exceeded 9.5% of income.

Metal Levels – Bronze 60% Actuarial Value –

Minimum Value Definition ==>An employer-sponsored plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. See Notice 2014-69 for additional guidance regarding whether an employer-sponsored plan provides minimum value coverage if the plan fails to substantially cover in-patient hospitalization services or physician services  IRS.gov  *  Covered CA Bulletin page 2  * Our Ben E Lect Webpage  * Employer is mandated to tell you 1095 C  *  IRS  Notice 2012-31

1095 C - Offer of Coverage
1095 C – Offer of Coverage
9.86% Applicable Percentage 2019
9.86% Applicable Percentage 2019  Rev Proc  2018-34

Related Pages, Links & Resources in the subsidy and tax credit section and FAQ’s

IRS FAQ’s on Shared Responsibility – Mandate – Penalties

Shrm.org

9.5% calculation tool – Excel from SHRM.org

8% Affordability Rule – Exemption Form #8965?

5000A (e) (1) (A)

HISTORICAL

affordable 9.5%
9.5% Affordability – This screen shot appears to be out of date – We are double checking

7 comments on “Affordable Health Coverage? 9.86% Employee ONLY

  1. My wife, son (age 11) and I have marketplace – Covered CA Oscar insurance this year. The premium is $175/month after ACA subsidy based on projected 2018 income of $75k for 3-person household.

    My employer just offered us medical insurance, which means family glitch. However, there is no employer contribution to the premium for my dependents.

    Can I get a hardship exemption and get catastrophic minimum coverage for my dependents?

    • What you are asking is way more complicated than it sounds.

      Here’s what sounds like the relevant exemptions:

      Coverage considered unaffordable—The required contribution is more than 8.16% of your household income.

      .0816 unaffordable

      Please enter your information, so that we can see what you have to pay for coverage.

      Aggregate self-only coverage considered unaffordable—Two or more family members’ aggregate cost of self-only employer-sponsored coverage was more than 8.16% of household income, as was the cost of any available employer-sponsored coverage for the entire family.

      Coverage considered unaffordable based on projected income—The Marketplace determined that you didn’t have access to coverage that is considered affordable based on your projected household income.

      How is affordable coverage defined?

      Coverage is considered unaffordable for individuals if their cost of coverage exceeds 8 percent of annual household income.

      If an individual is eligible for employer coverage, affordability is determined by comparing the “employee share” of the premium cost of self-only coverage for the employer’s cheapest coverage option that achieves minimum value (i.e., 60% actuarial value) to the taxpayer’s household income.
      If the individual is not eligible for employer coverage, affordability is determined by comparing to household income the lowest cost bronze plan (taking into consideration any applicable federal premium subsidies) offered in the Exchange where the individual would purchase coverage. BCBCM.com

      Even considering all that, does the premium difference between bronze and catastrophic make sense to do all the paperwork and hassle?

    • You might ask your employer to change his rules and not allow any dependents on the plan, as he’s not making any contribution anyway. Then you wouldn’t have the “family glitch.” Read above carefully for the citation.

      Affordability “Glitch”: This is only applicable to individuals that have an offer of coverage from their spouse’s employer. copied from Covered CA memo 1.31.2014

      What if the employer doesn’t offer family coverage?

      Some employers offer coverage for employees only, or for employees and their children, and do not offer spousal coverage. Large employers will face a penalty for failing to offer coverage to full-time employees and their children under the age of 26 if at least one employee receives a premium tax credit for marketplace coverage. There is no penalty for failure to offer coverage to the employee’s spouse. If no plan offered by the employer covers the spouse or children, the spouse or children may purchase insurance in the Marketplace and qualify for premium tax credits, assuming all other eligibility rules are met.

      Example
      It’s a new plan year and Jose’s employer has changed its coverage options. Now, Jose’s employer offers employee-only and employee-plus-children coverage. They’ve dropped the family coverage option so Alma no longer has an offer of coverage. Employee-only insurance costs $2,500 per year (7.1 percent of income) and coverage for the employee plus children costs $4,500 per year (12.8 percent of income). The “employee plus children” option is considered affordable, even though it costs more than 9.56 percent of income, because Jose’s employee-only insurance is affordable. This means that Jose and his children are not eligible for premium tax credits, whether or not they accept this coverage option. Alma doesn’t have an offer of coverage through her own or Jose’s employer so she may be eligible for premium tax credits to purchase coverage in the marketplace. Health Reform Beyond the Basics

      Here’s how Kaiser asks the question on their Employer Application

      kaiser.application

    • See the information above on “minimum value.”

      The American Worker website at https://theamericanworker.com/solutions/mecplans.html states that MEC is not minimum value, thus one would still be eligible for Covered CA subsidies.

      MEC [Minimum Essential Coverage] plans help employers meet one of the Employer Mandate penalties. By offering this level of qualifying coverage, employers will meet the requirement of offering “qualifying” coverage but not the requirement of “affordable” coverage. Employers must offer a Minimum Value Plan that meets the 60% Actuarial Value rule [Bronze] and affordability rules in order to avoid a $3,390 tax penalty for each employee who enrolls in a plan from the Exchange and receives a tax subsidy.

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