Employer Sponsored Insurance

The federal government provides the funds used to help consumers pay for their qualified health plans. Due to this, it does not allow people who can get affordable minimum essential coverage elsewhere to use insurance affordability programs on the marketplace. In other words, if a person can get qualifying insurance somewhere else, they can’t use Advanced Premium Tax Credits or Cost-Sharing Reductions to buy a less expensive plan on the marketplace. An individual who can get their qualifying insurance from an employer is an example of someone who is excluded from financial assistance for marketplace plans.

For employer sponsored insurance to “qualify,” it must meet two basic standards:

  1. It must be affordable
  2. It must meet minimal value

Affordability

According to the Affordable Care Act (ACA), the cost for employee only coverage in the employer’s plan cannot cost more than a certain percent of that employee’s household income. In 2019, this percentage was 9.78, but changes from year to year. Since employers do not know their employee’s household income, they typically design their plans with the assumption that the employee’s income is the only income. That way, they know they will stay at or below the threshold even if there is other income coming into the employee’s household.

Minimal value

Minimal value means that a health insurance plan must pay at least 60 percent of covered costs. This is about the same as the actuarial value of the Bronze plans offered on Maryland Health Connection (MHC).

If an individual is offered insurance by their employer that meets both the affordability and minimum value standards, they may not access financial assistance through the marketplace. They must either accept the employer’s offer of coverage or they may enroll in a marketplace plan but without financial help.

If an individual is not offered insurance by their employer, or their employer’s insurance offer does not meet one or both standards, they may access financial assistance when plan shopping at MHC.

It’s important to remember that if an individual’s income is low enough to qualify for Medicaid, they may enroll in Medicaid at any time regardless of their employer’s offer of coverage.

Even when an individual is excluded from financial assistance on the marketplace, there are circumstances when it would be less expensive to enroll in a marketplace plan without financial assistance than to accept coverage under an employer’s plan.

  • Younger employees, and those who work at smaller employers where coverage is likely to cost more, should check the marketplace and compare coverage there to the employer’s plan.
  • Individuals with families should also shop and compare. Employers tend to subsidize coverage for their employees, but not for employees’ families. As a result, the employee carries most or all the cost for their spouse and children. At the same time, the offer of coverage for the spouse and children often makes financial assistance on the marketplace unavailable often referred to as the “spousal glitch.” Families with this issue can still shop unsubsidized plans on the marketplace and check their children’s eligibility for Maryland Children’s Health Program (MCHP) or very low-cost MCHP-Premium to lower their total costs.

Some people ask their employers to complete the coverage employer tool. It is not required, but it can be helpful.

When working in the Health Benefit Exchange (HBX) program, please note the following:

  • When the ACA was created, it was assumed that applicants for marketplace coverage would provide information about employer coverage that would be included in their application. Maryland Health Benefit Exchange (MHBE) has found that, in contrast to this assumption, most individuals applying for coverage are not able to correctly answer these questions.
  • There is no electronic resource available for the HBX to call in order to verify the applicant’s attestation of employer coverage (or lack of coverage).
  • Consumer Assistance Workers need to get the following information from the consumer they are helping: Do they have employer-sponsored coverage? Who in their household is it offered to? Does it meet affordability and minimum value standards?
  • If an employee fails to enroll in the employer’s plan when she becomes eligible, or fails to enroll during the employer’s open enrollment period, they will not be eligible to enroll in the marketplace (with or without financial assistance) until the annual open enrollment for MHC occurs or unless they have a qualifying life event.
  • If the employee is in a waiting period before eligibility for employer coverage begins, they can enroll in the marketplace and receive financial assistance until the employer’s waiting period ends and coverage under the employer’s plan begins.

When an employee becomes unemployed and has coverage through his employer, he may be offered Consolidated Omnibus Budget Reconciliation Act (COBRA), which is a continuation of coverage under the employer’s group health plan but at full cost (the employer does not pick up any of the cost). The offer generally opens for 30-60 days after employment terminates.

Even though COBRA is an extension of the employer’s group health plan, the offer of COBRA coverage does not limit the individual’s eligibility for financial assistance on the marketplace, so long as the employee does not actually elect to enroll in it. For this reason, consumers should be encouraged to shop on the marketplace before enrolling in COBRA. If they enroll in COBRA, they may not terminate it to enroll in marketplace coverage instead until the next open enrollment period, or unless they have a qualifying life event that opens a special enrollment period.

Should you have any questions about employer sponsored insurance and marketplace coverage, please contact Heather Forsyth, Director of Consumer Assistance and Eligibility at MHBE.