Group Health Insurance Options and Alternatives

By “offering” your employees “affordable” coverage (whether they take the insurance or not), you may be and probably are blocking your employees and their families from getting a subsidy from the Government.  This subsidy (which you are preventing them from getting), would help them pay their health insurance premiums.

In many cases (especially with employees that have families), after a subsidy is applied to a family plan, the total out of pocket to the family (actual money out of their pockets) will be far less  than employer group insurance.  Especially if the employer does not pay a large portion for spouse and dependent coverage.

The rules of health care reform are that if the EMPLOYEES PORTION of the CHEAPEST health insurance plan that is offered by the employer is less than 9.66% of the employees “household” income, then the employee and their families are BLOCKED from getting a subsidy.

If your employee does not understand this and buys a health insurance plan with a subsidy (when they weren’t supposed to), they will have to pay their subsidies back to the IRS.

With a “Defined Contribution” you may be able to save money while offering your employees a better alternative to group health insurance.

♦ The employer’s plan that is offered to Sally costs the family $9,500 per year ($12,000 for the family plan minus(–) the $2,500 you pay to help Sally pay her premium on the group plan).

♦ IF… Sally and her family could get a subsidy, they would pay $4,150/year. (click on the subsidy quote example)

♦ The employer’s plan that is “offered” is costing this family over $5,000/year!

♦ The subsidy quote example illustrates what rates your employees are seeing for their families when the Government subsidizes their family premiums.  By offering “affordable” coverage, you will be blocking these subsidies.

AFFORDABILITY (defined by the Government).

So we must first understand affordability.  If the plan you offer is “affordable” (less than 9.66% of household income), then your employee and whoever you’ve “offered” coverage to cannot get a government subsidy; it’s considered affordable for the whole family.  Those folks that have been offered an affordable plan cannot be subsidized.

Let’s read that statement again.  If you offer an “Affordable” plan, your employees will not be able to receive a subsidy.

The rule is, if Sally’s portion that she pays is less than 9.66% of her household income, then your group plan is affordable for the whole family, and all employees that are “offered” insurance are now blocked from subsidies.

EXAMPLE

♦ Sally’s income is $30,000/year X 9.66% = $2,850/year.

♦ Sally’s portion (she pays $2,500/year).

♦ Sally’s portion she pays at work ($2,500) is less than 9.66% of her income.  9.66% of Sally’s income is $2,850.

♦ $2,500 (work) is less than $2,850 (9.66% of her income)

Her insurance at work is then considered AFFORDABLE, so she and her family that have been “offered” a health plan are now blocked from getting a subsidy.

If 9.66% of Sally’s income is more than what her portion of the lowest cost premium that the employer offers, then it’s deemed affordable for the whole family if John and Sally are married.

What about Sally and John’s COMBINED income?

What about the household income?

Together their incomes are $60,000/year.

Now is Sally’s plan affordable? Let’s see.

♦ $60,000 X 9.66% (0.095) = $5,700.

♦ SALLY’S PORTION from her employer’s plan is $2,500.

♦ $2,500 is less than $5,700. Sally’s plan is Affordable.

Sally and any family members that have been offered insurance by her employer are blocked from getting a subsidy.