Health insurance can be purchased through the Marketplace as long as your employer does not offer you affordable coverage.
The premium tax credit is only available to people without affordable and adequate coverage; in many cases, this will mean that people with employer-sponsored coverage will not be eligible for the premium tax credit.
Affordable health insurance
If my employer offers health insurance can I still qualify for a premium tax credit?
In most cases, no. If your employer offers coverage this usually makes you ineligible for premium tax credit.
♦ The exception is if your employer-sponsored coverage is unaffordable or fails to meet the minimum value standard.
If the coverage is affordable and adequate, you will be ineligible for premium tax credits regardless of whether you decide to enroll in the employer-sponsored coverage.
If your employer’s health plan does not offer adequate coverage or is not affordable, you can enroll in coverage through the Marketplace and you may qualify for premium tax credits.
Marketplace Plan Not Affordable
It is possible that a Marketplace plan may also be unaffordable. Prior to 2019, there was a requirement to have health insurance or pay a penalty.
It was possible to claim a hardship exemption if the coverage available through the Marketplace was too expensive.
♦ In 2019, the penalty was eliminated but if you are older than 30 and wish to purchase a catastrophic health plan you will need to request an exemption.
Is my employer's plan affordable?
This question comes into play if you hope to receive tax credits to purchase insurance through the Marketplace instead of receiving your employer's health insurance.
In 2023, insurance from your employer is considered affordable if the employee’s share of the premium for the lowest self-only plan available does not exceed 9.12% of an employee's household income.
♦ The law considers the cost for insurance that would cover the employee only — not the employee’s family. This oddity in the law has be dubbed the “family glitch”.
• The IRS decided that an employer would not be able to understand an employee's household income so they set a dollar limit as a form of "safe harbor" for the employer to use. If an employer that offers a medical plan option in 2023 that does NOT cost he employee more than $103.28 per month for employee-only coverage then that coverage will automatically meet the ACA affordable standard.
♦ In April 2022, the Biden administration proposed a rule change to fix the "family glitch."
The change would consider the cost of insurance as the cost of covering the employee and their family members.
The rule change must be open for public comment for 60 days. It is likely that it will be finalized after comments are reviewed.
HHS and the IRS say they are committed to ensuring the family glitch is fixed in time for the 2023 plan year. As of this writing, it has NOT been finalized.
You may purchase a family plan through your employer but it is only the portion of the employee’s cost that is considered in reaching the 9.12%.
Keep in mind that with most job-based health insurance plans, your employer pays part of your monthly premium. It is only what you actually pay that counts toward the 9.12%. It is most likely that you will not exceed 9.12%.
♦ So, if you have an offer of job-based coverage and enroll in a Marketplace plan instead, you probably won’t qualify for a premium tax credit and other savings — even if your income would qualify you otherwise.
You’d have to pay full price for a Marketplace plan – even if you don’t enroll in the insurance your employer offers.
Employee’s monthly household income = $4,000
9.12% of the employee’s monthly household income = $364.80
Monthly cost to the employee of the lowest-priced plan the employer offers for self-only coverage = $350
Is the plan affordable? YES. The employee’s share of the lowest cost self-only plan ($350) is less than 9.12% of the employee’s household income ($364.80).
Employee’s monthly household income = $2,500
9.12% of the employee’s monthly household income = $228.00
Monthly cost to the employee of the lowest-priced plan the employer offers for self-only coverage = $280
Is the plan affordable? NO. The employee’s share of the lowest-cost self-only plan ($280) is more than 9.12% of the employee’s household income ($228.00).
I believe my employer's plan not affordable...
What do I do?
If you believe your employer's health insurance is not affordable or does not meet the minimum value standard you should report this to the Marketplace.
The Marketplace has available a form called: Employer Coverage Tool. It is a two page document which asks information from you and from your employer.
♦ Employers are not required to complete this form but most will.
The form will help you to show the Marketplace the type and cost of health insurance available through your employer.
If you cannot obtain this information from your employer, you should still report to the Marketplace what you know. The cost of coverage and whether it meets the minimum value standard.
♦ The Marketplace may try to follow up with your employer to verify this information.
The Marketplace will determine your eligibility for subsidies based on the information you provide and based on any information the Marketplace might be able to obtain from your employer.
♦ All employers are required to provide you with this information at year end. In January, your employer will provide you with a Form 1095-C.
This form will indicate whether your employer's health insurance plan (in the prior calendar year) met the requirements for affordability and minimum value. There could be a conflict if your employer uses the "safe harbor" dollar value to defend their coverage as being affordable. It is not clear how such a conflict will be resolved.
Can my family buy from the Marketplace?
And I have my company's insurance
Yes. Your spouse and children can purchase insurance thorough the Marketplace.
♦ But because you have affordable insurance through your employer your spouse and children will not be able to receive a premium tax credit or other savings.
Since they are not receiving a premium tax credit they can also consider plans offered off the exchange. Also, they may qualified for CHIPS and/or Medicaid.
♦ Purchasing separate plans can be very difficult to manage. When purchasing separate insurance plans you lose the benefit of a family deductible.
If you anticipate large medical expenses, having a family deductible can potentially save you a lot of money in the long run.
♦ The larger the employer the more power they have to negotiate pricing and benefits.
Minimum Value Standard
A health plan meets the minimum value standard and is adequate if it pays at least 60% of the total cost of medical services for a standard population and offers substantial coverage of hospital and doctor services.
In other words, in most cases a plan that meets minimum value will cover 60% of covered medical costs. You would pay 40%.
Most job-based plans meet the minimum value standard.
Dig a little deeper into this subject at Minimum Essential Coverage.