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Small Business Employee Benefits and HR Blog

Are Employees Missing Out on the Health Insurance Subsidies?

December 24, 2015
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One of the key components of the Affordable Care Act, or Obamacare, was the Are Employees Missing Out on the Health Insurance Subsidies?idea that insurance should be affordable for every single person. For those who have difficulty paying for health insurance, the law offers subsidies to reduce the monthly premiums, deductibles, co-payments, and other out-of-pocket spending. However, studies have shown that as many as two million people who are likely eligible for subsidies might be missing out. Here are some of the common reasons they might not be getting this assistance.

Misunderstanding Eligibility Requirements

Under the new law, a person or family whose income is between 100 and 250 percent of the poverty level (a single-person household making between $11,700 and $29,425 per year, or a family of 4 making between $24,250 and $60,625 a year) would be eligible for some type of subsidy if they purchase a silver-level plan or above. There are also cost-sharing reductions for someone whose income is as high as 400 percent of the poverty level, but these are a little different from subsidies. In 2015, there were over eight million people who fell into this category, but fewer than six million actually got the reductions.

Not Realizing Subsidies are Available

Another reason many people might miss out on available subsidies is that they are unaware that these reductions are available when they are on a health insurance plan through an employer. The law prohibits someone who has “access to affordable, employer-based health insurance” from taking advantage of the subsidies, but this is where it’s important to read the fine print.

If an employer does not offer an insurance plan that meets the minimum criteria to be considered up to standard (i.e., the benefits are less than what a Bronze-level plan includes on the exchanges), or if the costs to purchase an employer’s health insurance plan exceeds 9.5 percent of an individual’s income, they are eligible for subsidies. In calculating eligibility, an individual would use their Modified Adjusted Gross Income (MAGI) from their taxes—this figure is calculated after deductions are taken.

Forgetting to Report Changes in Income

When someone’s household income changes, especially if it’s decreasing due to job loss, downsizing, or other similar situations, they should be sure to report that change for insurance purposes. Even if they weren’t eligible before, the change in their financial situation may have changed the calculation so their premiums are now more than 9.5 percent of their total income.

Working for a Small Company

While there are specific regulations for small businesses that have fewer than 50 full-time-equivalent employees, there are special tax credits and other subsidies available to very small employers with 25 or fewer employees. This can help reduce costs even more for both employee and employer.

Conclusion

Both companies and employees need to have a good understanding of what subsidies are available and the eligibility requirements for these subsidies so they can keep their own health insurance premiums as low as possible. Avoiding some of the common mistakes and misunderstandings can help reduce the chances that your employees are among the 2.2 million people missing out on these cost savings in 2015.

Do you have questions about your employees’ eligibility for subsidies? Ask us in the comments below.

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