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Can you qualify for premium subsidies if you decline employer-sponsored insurance?

Health Care FAQ
The latest news about the new health care law and how it affects you.

Q. I dropped out of my employer-sponsored health insurance plan last year when I was 60 and facing a premium increase that would take more than one-third of my salary.

My self-employed husband already had a high-deductible plan with Blue Cross and Blue Shield of North Carolina, and I was able to get a policy like his for about one-third the cost of my employer’s plan.

This fall, I received a notice from Blue Cross that it is canceling my current policy because it doesn’t meet the requirements of the Affordable Care Act.

If I were to go back on my company-sponsored plan next year, the premium would cost more than I earn in a year.

I read that if an employer offers insurance one is not eligible for subsidy on Healthcare.gov. So how do we get help? I cannot purchase insurance that costs more than I make.

A.

Madison Hardee, a lawyer with Legal Services of the Southern Piedmont, said this may be a case of someone falling into what is referred to be some as the “family glitch.”

If you’re a spouse or dependent child and you have access to a family member’s employer-based coverage, you may be rendered ineligible for tax credits. But employer-based insurance will disqualify the employee and their family members from tax credits only if the coverage meets two tests:

(1) Minimum value: The coverage must have an actuarial value of 60 percent, which means it’s designed to pay at least 60 percent of the total cost of medical services for a standard population. (Most employer-sponsored plans meet this standard.)

(2) Affordability: The cost of coverage to the employee only (not the family) must be less than 9.5 percent of household income.

If both tests are met, the employee and family members will not be eligible for tax credits in the marketplace. The glitch is that this affordability test does not consider the cost of coverage for the entire family, so coverage deemed “affordable” might not actually be affordable to insure the entire family.

To find out if an offer of coverage meets the tests described above, consumers should ask employers to fill out the “employer coverage tool” and use this information when applying for insurance on the marketplace. If the coverage offered is “unaffordable” and/or does not meet minimum value requirements, the consumer will be able to access tax credits through the online marketplace.

Even if family members are not eligible for tax credits in the marketplace, they are able to shop for unsubsidized plans. Depending on the situation, this may be a more affordable option.

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