How Affordability Is Determined Under ACA

Understanding What Qualifies Coverage As Affordable

The Affordable Care Act (ACA) has changed the face of healthcare in the United States in an effort to make securing health insurance affordable for every American. What, exactly, qualifies as affordable coverage? It cannot just be a vague idea, as the government now requires all businesses that employ a certain number of people to offer affordable coverage to their employees. So how, then, is affordability defined?

According to ACA standards, a plan is considered affordable if it costs 9.5 percent or less of the individual it covers income. As an employer, how can you know if your plan will be affordable for your employees? There are a few safe harbors you can use to avoid being hit with penalty fees.

First, you can reference Box 1 on your employee’s W-2, where he or she will have to report his or her taxable income. Secondly, you can base affordability off your employee’s rate of pay on the first day of coverage under that plan. And finally, you can rest easy knowing your plan is affordable if your employee’s paid share is not more than 9.56 of the federal poverty level for a single individual. These safe harbors enable you to protect your employees by ensuring they are able to afford the protection they need, and protect your business from penalty fees.

Do not be left wondering if the plans you offer as a business or the plan you secure as an individual will be complaint with ACA regulations, only to be hit with tax penalties in April. To have a certified agent come alongside you to help you navigate the changing face of health care, contact Bernardini & Donovan Insurance Services today. Located in Redlands, we are here to help you secure the best protection for you and your family. To get the health insurance you deserve this year, call us today!

Employer sponsored coverage, and Covered California premium subsidy, consumers be ware!

It has been brought to our attention through various sources that consumers are being misinformed and misled when it comes to qualifying for premium assistance through Covered California. We want to address this issue, as it has the potential for severe consequences.

Employees who are offered coverage through their employer cannot receive subsidy if their employer offers “affordable” coverage. How is “affordable” coverage defined under the Affordable Care Act? To determine if the coverage is “affordable” or not, we look at the employee ONLY monthly rate for health insurance coverage. The cost to add dependents, spouse, children, etc. DOES NOT play a role in this calculation. If the employee only pays less than 9.5% of the gross household income for health insurance, the coverage is deemed “affordable”.

A simple calculation would look like this. Let’s say the gross HOUSEHOLD income is $50,000. 9.5% of the gross family income would be $4750.  So, the EMPLOYEE ONLY would have to pay less than $396 per month ($4750 divided by 12 months equals $396 per month) for the coverage to be “affordable”. It is quite easy for an employer to provide “affordable” coverage. If the EMPLOYEE ONLY pays less than 9.5% of the gross household income on a monthly basis, ALL family members are disqualified from receiving subsidy through Covered California.

However, the children, based on the gross HOUSEHOLD income, may still qualify for Medicaid. Bottom line, if your employer offers you coverage, you need to check and see if it is affordable before looking to Covered California for subsidy. It is quite likely you will NOT be eligible for it.

Call us with questions at 909-792-5100.

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