ObamaCare Exchanges vs. Employer Health Insurance

In our continuing effort to keep you informed on what has become a developing debacle, here is an interesting article for those who have the good fortune of having Employer Sponsored Health Insurance.

By Susan Ladika

Published October 16, 2013


If you already have health insurance through your job, you’re probably wondering whether Obamacare will give you some new options. Will you be able to comparison-shop for a plan on the new online exchanges that might be better than your employer health insurance? The answer is a big, resounding “maybe.”

Like almost everything else having to do with health care reform, there are plenty of nuances and caveats. Trying to decipher them and choose the best health insurance plan for your situation “makes homeowners insurance seem really simple,” says Brian Haile, senior vice president for health policy at the tax services company Jackson Hewitt.

Exchanges will be open to all, but …

The exchanges are online health insurance marketplaces set up under the Affordable Care Act. In 34 states, the marketplaces operate through the federal government’s HealthCare.gov website, while 16 states and the District of Columbia are running their own exchanges.

Even if your employer already offers health insurance, there’s nothing to prevent you from shopping on your state’s exchange. However, if you decide to leave your work-based plan and purchase coverage on the exchange, you “may not qualify for some of the benefits that the uninsured have,” notes E. Denise Smith, a professor of health care management at Gardner-Webb University in Boiling Springs, N.C.

Here’s the big hiccup: Unless your employer’s coverage for an individual is considered unaffordable under the law (that is, if your share of the premiums costs more than 9.5% of your household income) or inadequate (picking up less than 60% of the cost of covered benefits), you aren’t eligible for a government subsidy to help pay for your insurance. Subsidies are one of the things that can make plans on the new state exchanges appealing.

Subsidies in the form of tax credits are available even if you earn up to 400% of the federal poverty level, currently about $46,000 for an individual and $94,000 for a family of four. The subsidies vary based on income and the size of your family.

Trade in your employer plan?  

And that brings us back to the central question: If you have employer health insurance, should you check out the Obamacare exchanges anyway? There are differing opinions.

“It would generally not benefit an employee to leave their employer-sponsored plan,” Smith concludes, adding that your employer would be under no obligation to help pay for an exchange plan.

Haile says you may not be able to do better than your work-based coverage. “Look at how robust your employer plan is” and the benefits it provides, such as whether it includes dental and vision care, which are not part of the essential health benefits that must be offered with plans sold in the Obamacare exchanges, he says.

Still, if your employer-sponsored health insurance seems to eat up a big chunk of your budget, you might want to explore your options on the state exchange, Haile says.

Few workers have ‘unaffordable’ plans

Again, one of the key criteria of whether you’d qualify for subsidized insurance through your state’s exchange is if your share of the premium for an individual health plan where you work would amount to more than 9.5% of your household income. Whether you take more expensive family coverage doesn’t matter; the benchmark is what an individual policy would cost.

The rule means that someone earning $40,000 a year and paying $3,775 for individual coverage would not be eligible for a subsidy, says Brian Poger, CEO of Benefitter, a software company that’s helping employers navigate their way through health care reform. That same worker paying even more for family coverage would still not be eligible because, again, the premium for an individual is less than $3,800 (or 9.5% of $40,000).

The 9.5%-of-income threshold is one that few workers would meet, according to one recent study. The ADP Research Institute found that only 8.6% of employees are required to pay premium contributions that would meet the Affordable Care Act’s definition of “unaffordable.”

How will you know whether your premiums and income put you in that group and make you a good candidate for an exchange plan? Right now, it’s a little unclear.

“The answer is sort of a mish-mash,” Haile says. Many of Obamacare’s employer requirements were delayed until 2015, though companies were still supposed to provide notices by Oct. 1 telling workers whether their current coverage would be considered affordable. But the U.S. Labor Department says there’s no fine or penalty for failing to provide the notices.

Exchange coverage for family members

Under those same delayed “employer mandate” provisions, companies with at least 50 full-time workers will be required to offer health insurance to their workers and the workers’ dependent children in 2015. But coverage for workers’ spouses will not be mandatory, notes Christine Barber, senior policy analyst at Community Catalyst, a health care advocacy group.

“If your spouse isn’t covered by your employer’s insurance and doesn’t have insurance through his or her own employer, your spouse could shop for insurance on the exchange and potentially qualify for a subsidy,” Barber says.

Others who might find it valuable to shop on the exchanges are working singles under the age of 30 who don’t have health issues and would be able to purchase a catastrophic plan, Haile says.  

Catastrophic plans available on the state exchanges will have low monthly premiums but high deductibles. According to Haile, they’re not eligible for subsidies.

All workers at a particular company often pay the same rate for their employer health insurance, regardless of age or medical history, he says. Opting for an Obamacare catastrophic plan “could be cheaper if you’re the young kid on the block,” especially if your co-workers are decades older, which could drive up everybody’s insurance costs.  

Affordable Care Act, The Marketplace

In last week’s blog I gave you ACA (Affordable Care Act) in a nutshell.  This blog is designed to be part II to las week’s blog.  Our intent is to offer you a bit more insight as to how the Marketplaces, created by ACA,  are supposed to work.

First of, a Marketplace, or commonly referred to as an Exchange, is a place in the internet where everyone eligible for ACA may go and purchase their health insurance policy.

Before I go any further, let me refresh your memory as to whom is eligible for ACA.  Eligibility is very simple, you must be less than 65 years of age, a legal resident of the United States, and not be in prison.

Now there are some exemptions to the law and these are as follows: individuals who are covered under a company’s group policy, a veteran’s health plan, if you have a plan bought by you that meets the criteria of the bronze plan,  those who qualify for medicare or medicaid, children on the CHIP program, American Indians, yearly income below $10,000 for individuals, $20,000 for family, if you have to pay more than 8% of your income towards health insurance after employer contributions or tax credits, members of the Military, members of Congress, the President and if your dead.  I can assume that if you’re reading this blog, at least you’re not dead.

For the rest of us, to include the self employed, dependent family members, individuals whose employer have decided not to offer an insurance program, and everyone else not mentioned in any of the above categories, we have the Marketplace.  Side note, I did not mention the undocumented immigrants, only because they are not included in any of the health programs available to the rest of us.

So what is in the Marketplace?  Good question, glad you asked.  First let me tell you that there are two types of market places, actually four, there is the Federally run and the State run programs, and within those there is a Marketplace for individuals and their family and then there is the SHOP, which is a Marketplace for businesses with less than 50 employees.

Confused yet? Don’t be! Right now we are just going to speak about the Marketplace for the individual and their family.

I must add that not all states will have a Marketplace online, such as Florida.  So, if you are a resident of a State without a Marketplace, you can access the Federally run program.

So, back to the previous answer.  A Marketplace is an internet portal where, by putting your pertinent information, you will be able to seek, and maybe find, a premium discount.  You will be able to find out if you are eligible for a tax credit, and you will also be able to purchase your health insurance.  All Health Insurers who are licensed in your state will appear in the Marketplace.

I know your next question; so how does this work?  Well, each Marketplace, whether Federal or State, is connected to the IRS; yup! no more cheating on your taxes; once you put in the information requested you will be crossed referenced with the IRS servers and… Bingo!!! you are told if you are eligible for a premium discount, and if you are eligible for a tax credit.

Now you’re beginning to salivate; premium discounts and a tax credit to boot.  Well, not so fast, you may either get one of the two or none.  It all has to do with your yearly household income and the number of family members.  Again, the Marketplace figures all of that out for you.  If you are eligible for a premium discount you have the option of getting it right then and there or later on as tax write off.

So you have now entered all of the tedious information requested from you and you are told that you are eligible for a premium discount, you now go to the next phase, which is choosing which insurance policy best suits your family.  You will have a pick from four basic policies, Bronze, Silver, Gold and Platinum.

For the sake of numbers, let’s say that your family premium discount is $300 a month and you choose a program that will cost your family $500 a month; you will have to out-of-pocket the the balance of the monthly premium of $200.  Now lets reverse the scenario; let’s say that your premium discount is $300 a month and you choose the bare minimum program, and the premium on that program is $200 a month. Well, now you do not have to out-of-pocket one red cent.

Some families, depending on their income and family structure, may be eligible for a tax credit if they choose to pay for a policy whose premiums are above the allotted premium discount.  Once again, the Marketplace will figure it all out for you.

In a nutshell, this is the way that it will play out for most middle class families who do not enjoy the umbrella of a company group plan.

Before a I let you go so I can begin working on with my next blog, there are a couple of points which you should be aware of.  First, the only criteria to purchase health insurance after January 1st, 20114, is, age, if you are a smoker, state where you reside and family component.  So, if you are not in jail, an undocumented immigrant or dead, you are now able to obtain health insurance regardless of your health condition.  Second, don’t fret, it’s not as complicated as it seems, that’s why we’re here to help.

If you have any questions, are still confused, or just don’t want to think about it, send us an email to info@soraglobal.com.  We will try to answer your questions to the best of our ability, then send you on your way to the insurance program that best fits you and your family.

Affordable Care Act In A Nutshell

You might as yourself; if Sora Global provides health insurance for the international community, why is he talking about the Affordable Care Act (or Obamacare, as most people call it)?  And no, this is not a political opinion blog.  I will not be offering my wisdom on whether it’s going to work or not, that’s for another time.  Anyway, regardless of my personal opinion on the subject, on January 1st of 2014 we will all be affected by this law in one way or the other.  Well, maybe not all; if you are the President or a member of congress you will be spared, but since most of us are neither we need to be aware so that we don’t get caught with our… whatever, down.

This blog will be very brief, I will only be offering the bare bones facts about the program, if you want to find out any more on the subject, you can call or email me and I will be glad to give you a more detailed account.

We can start by saying that we will all fit into one of three categories:

An employee of a company of 50 employees or more, where the employer will be required to offer you, not your family health insurance.  In this scenario, in order to qualify for your company’s health program you must be a full time employee (30 hours) or more.  The company may elect not to pay for your insurance in one of two ways: 1) Buy reducing your hours to less than 30 (a company is not obligated to pay for part time employees), or 2) By simply denying you, the employee coverage.  If the company opts for option 2, then the company is penalized by the government for a set amount per employee.  Your are now on your own to find affordable healthcare. Mind you, the company can opt to subsidize some of your healthcare cost by including a certain amount extra on your paycheck.  This possible subsidy, offered by the company, could create a positive tax advantage for the employer which could possibly offset the penalties set by the government.

A company employing  less than 50 employees, the employer is not required to offer you health insurance, and will not be penalized for doing so.  In the event that the employer does offer its employees health insurance, the employer can chose the company, how much of the premium is paid by you and if your dependents can be covered, or not.  If this employer decides to offer his employees coverage and said employees are earning within the poverty level, the employer may be eligible for a tax discount.   The drawback for you, the employee, is that if your health insurance is obtained through your employer you will not be eligible for possible premium discounts.  I’ll explain about these discounts when I talk about the individual or family policies.

So, let’s talk about what is going to be the bulk of us, those who are unemployed, self-employed, or whose employer has decided not to offer coverage; what’s going to happen to us?

We, and I mean we, I fit into one of those categories, are probably the most fortunate, we get to go online and chose to our heart’s desire.  The Federal Government and some States, Florida not being one of them, has set up what is called Marketplaces (In will speak in depth on this subject in my next blog).  A Marketplace has been referred to as Exchanges, and all that it is is a portal in the internet where you and I can go find our insurance coverage.  It’s that simple, huh! No, not quite that simple, that’s why you have and need me, but I’ll talk about that later on.

As of October 1st, 2013 the Federal Marketplace, for individuals as well as for small companies will go online.  At which time any of us can access it to find out our eligibility for discounts and costs.  Those are the discounts I spoke about in the last paragraph.  If you are within a certain income range and your family size is of a certain number, you may be eligible for an immediate discount on your monthly premiums.  How do you know if your eligible for the discount, simple, the Marketplace will take your data, cross-reference it with the IRS and “Bingo” you will be given a yes or no answer, and if the answer is yes, you will also be given a dollar amount.  Given you annual income and the size of your family you may also be eligible for a tax discount.

Who is eligible for the Affordable Care Act?  Well, anyone who is under 65 years of age, a legal US resident, is not in jail, and can afford to pay the premiums.

I know I made it sound simple, but I fear that it will not be as much.  That is why people such as myself, who are licensed insurance agents and have gone through the Marketplace and SHOP certifications are here to help you.

My next blog will speak to the Marketplace and Marketplace SHOP.  I will be offering more information as to eligibility, penalties and such.

In the meantime if you feel the need to ask questions, please feel free to do so at info.soraglobal.com and we will be very glad to answer to the best of our ability.

As of October 1st, when the Marketplace goes online I will be able to offer more specific assistance and even get you started on your way to your new health insurance.