Years ago, when the Affordable Care Act (ACA) was being debated at a national level, one of the catch phrases used to advocate the passage of the ACA was “you can keep your doctors.” Frequently, when I explain to a client that their HMO does not have their doctor in network, they will ask, what happened to “you can keep your doctors”? Just like “keeping your doctors” is not reality, neither is affordable, full major medical coverage for everyone who needs insurance.
Recently, I was contacted by a new client who called because he received a renewal notice and the new cost for his employer’s group health insurance plan, and he asked me to provide quotes for individual family coverage. As an employee, he was eligible for group coverage for $300 per month, but to upgrade to the family plan he would be required to pay an additional premium amount of $1,200 per month. To add his wife and one dependent child, his total monthly cost would be $1,500. The employer is required to pay a portion of the cost of the employee’s health coverage but is not required to contribute anything to the cost to insure the spouse or dependent children.
Healthcare.gov establishes that the benchmark cost for affordable coverage is 9.8 percent of household income. In this case, my client’s household income is $75K and his employer group premium for the upcoming year will cost the family $18K. The premium cost to keep the coverage offered by the employer totals 24 percent of the family household income, well above the 9.8 benchmark percentage established by the ACA. This is just for premiums alone and does not include any medical expenses the family may incur throughout the year, up to a $5K deductible.
Typically, any three-person household with a gross taxable income of $75K would be eligible for a large premium subsidy. In this case, the estimated subsidy for the family based on his gross taxable income and ZIP code would be $1,195 per month. This amount could be used toward the purchase of an ACA individual family plan. However, because they were offered group coverage, the family is not eligible for the premium subsidy due to the 9.8 percent affordability guidelines. Instead of counting the entire cost the family would pay for the group premiums, the revised standard only counts the cost for the individual employees cost of coverage and that cost must exceed the 9.8 percent affordability standard.
$300 per month for just the employees cost of the group premium only represents 4.8 percent of household income. As such, the group health plan is deemed affordable according to ACA regulations, even though the actual premium cost of $18K per year to cover the entire family represents nearly one quarter of the family’s gross household income. More and more families are concerned about the rising premium cost of group coverage and finding ways to manage their health insurance cost to a reasonable amount of household earnings.
Even though this client is not eligible for the premium subsidy, he can still purchase a marketplace ACA plan at the full premium rate. In this case, lowering the annual premium cost was paramount to continuing health coverage and the client was willing to consider plans with a slightly higher deductible than the $5K offered by the group plan. Since the employer is required to pay a portion of the employees cost of coverage, it was better for the client financially to continue the group coverage for himself and review ACA plans for his wife and daughter. We were able to find their preferred doctors and hospitals in network with one of the local ACA carriers and he chose a bronze level plan for $767 per month, effectively lowering the premium cost for his wife and child by $433 per month.
Consequently, the family is saving $5,196 annually in out-of-pocket premium costs when compared to the cost of the group plan. However, the cost is still much higher than they would pay for subsidized ACA coverage.
We want to help you sort through your options for health insurance to find a plan that is right for your family and your budget. Contact your ARC representative today for assistance.