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Group health insurance coverage is a health insurance policy that is purchased by an employer and is offered to employees (and typically to the employees’ family members) as a benefit of working for that company. It is usually part of a comprehensive benefits packages that employers provide for employees.
Millions of Americans have health insurance coverage through their employer or the employer of a family member. Typically, employers will pay at least half (and up to 100%) of the monthly premium for an employee.
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If you are NOT offering a GREAT group health insurance plan (defined by your contribution) you may unknowingly block your employees (and their families) from a Government subsidy.
As an employer, you know great health insurance benefits attract the best and brightest talent to your company. Traditional group health insurance may no longer be the best option. You may unknowingly block your employees and their families from a Government subsidy if they are entitled to one, and not even know it by offering a group health insurance plan.
Allow your employees to get their APTC (Advanced Premium Tax Credit) subsidy from the Government, and depending on their Federal Poverty Level, a CSR (Cost Sharing Reduction) on their deductibles, co-insurance and co-pays too. Click here for more information
With the Affordable Care Act or “Obamacare”, businesses with less than 50 full-time-equivalent employees are NOT required to provide health insurance to their employees. Businesses with 50 or more full-time-equivalent employees MUST provide “affordable” health insurance or pay a tax penalty.
Businesses with 25 or fewer full-time-equivalent employees (with average annual wages less than $50,000), may be eligible for tax credits up to 50% of the employer’s contribution.
Once your application has been reviewed and approved, the insurance company will determine the final monthly cost for your group health insurance plan using the information from the application. With the Affordable Care Act or “Obamacare”, the health of your employees (including any pre-existing conditions), will no longer impact group health insurance rates. The main contributors to the cost will be the size and location of your company plus the age of your employees.
By “offering” your employees “affordable” coverage (whether they take the insurance or not), you may be and probably are blocking your employees and their families from getting a subsidy from the Government. This subsidy (which you are preventing them from getting), would help them pay their health insurance premiums.
In many cases (especially with employees that have families), after a subsidy is applied to a family plan, the total out of pocket to the family (actual money out of their pockets) will be far less than employer group insurance. Especially if the employer does not pay a large portion for spouse and dependent coverage.
The rules of health care reform are that if the EMPLOYEES PORTION of the CHEAPEST health insurance plan that is offered by the employer is less than 9.66% of the employees “household” income, then the employee and their families are BLOCKED from getting a subsidy.
If your employee does not understand this and buys a health insurance plan with a subsidy (when they weren’t supposed to), they will have to pay their subsidies back to the IRS.
With a “Defined Contribution” you may be able to save money while offering your employees a better alternative to group health insurance.
With a defined contribution, your out of pocket expenses are controlled. You define a fixed contribution amount. This gives the employee the ability to choose the benefits that are important to them.
With the assistance of a Third Party Administrator, the employer is assisted in organizing the defined contribution by using an online administrative platform. The employer decides an amount to “contribute”. The employer is assisted in setting up the online portal the employees will visit. The employees then visit the portal online to spend their defined contribution on the benefits they want to have.
Employers are now beginning to allow their employees to shop for their own health insurance coverage so the employees don’t just have 1 or 2 plans to choose from. Instead, they define a contribution amount and allow their employees to choose which benefits they want. The contribution in a specific dollar amount becomes the benefit, and the employees (with guidance from a licensed agent) can then go to a private exchange and shop for the best plan themselves.
Choice is a key component of a defined contribution strategy. Employees will need to have access to plans that have government subsidies, along with the private “off exchange” plans, plus supplementary benefits such as dental, vision and life. This option allows the families to control and choose what’s best for them.
Employers are looking for ways to control their costs, and by “defining a contribution” instead of defining benefits (typical group insurance) it allows employers to have a pre-calculated budget for their employees’ benefits plans. This allows the employer to get out of the benefits business and get back to running their own business.
Think of the Defined Contribution as giving them a gift card to spend on benefits, instead of choosing their benefits for them with group insurance. And when you compound that benefit to the employee receiving a subsidy from the government, the benefits stretch that much farther. Some of your employees may even qualify for the “Cost Sharing Reduction” benefit which is in addition to the APTC “Advanced Premium Tax Credit.” This is dependent upon their federal poverty level.
So we must first understand affordability. If the plan you offer is “affordable” (less than 9.66% of household income), then your employee and whoever you’ve “offered” coverage to cannot get a government subsidy; it’s considered affordable for the whole family. Those folks that have been offered an affordable plan cannot be subsidized.
Let’s read that statement again. If you offer an “Affordable” plan, your employees will not be able to receive a subsidy.
The rule is, if Sally’s portion that she pays is less than 9.66% of her household income, then your group plan is affordable for the whole family, and all employees that are “offered” insurance are now blocked from subsidies.
EXAMPLE
♦ Sally’s income is $30,000/year X 9.66% = $2,850/year.
♦ Sally’s portion (she pays $2,500/year).
♦ Sally’s portion she pays at work ($2,500) is less than 9.66% of her income. 9.66% of Sally’s income is $2,850.
♦ $2,500 (work) is less than $2,850 (9.66% of her income)
Her insurance at work is then considered AFFORDABLE, so she and her family that have been “offered” a health plan are now blocked from getting a subsidy.
If 9.66% of Sally’s income is more than what her portion of the lowest cost premium that the employer offers, then it’s deemed affordable for the whole family if John and Sally are married.
What about Sally and John’s COMBINED income?
What about the household income?
Together their incomes are $60,000/year.
Now is Sally’s plan affordable? Let’s see.
♦ $60,000 X 9.66% (0.095) = $5,700.
♦ SALLY’S PORTION from her employer’s plan is $2,500.
♦ $2,500 is less than $5,700. Sally’s plan is Affordable.
Sally and any family members that have been offered insurance by her employer are blocked from getting a subsidy.