How does my access to employer-sponsored coverage impact my eligibility for subsidized coverage through the exchanges?

Q. My husband and I have a combined household income of $64,000 and we have three children. I know that puts us under the income cutoff for getting a subsidy in the exchange, but we also have access to health insurance through my employer. My company lets me buy health insurance for myself for $90/month, but adding my husband and kids brings the total payroll deduction to $850/month. My husband’s company doesn’t offer health insurance, so we’ve always covered the family on my plan. Can we drop them off of my plan and have them get subsidized health insurance through the state exchange instead?

A. You’re correct that your household income is under the cutoff for subsidy eligibility, which is $120,680 for a family of five for 2020 coverage. However, subsidy eligibility is also determined by access to group health insurance. So the fact that your family has group health insurance available will be considered, and eligibility will be based on whether or not that coverage is considered “affordable.”

What counts as “affordable”?

The IRS issued a ruling in early 2013 that defined “affordable” as coverage that costs the employee no more than 9.5 percent of the employee’s household income, for just the employee’s portion of the coverage. That threshold is indexed for inflation; in 2020, it’s 9.78 percent of household income.

Even though the coverage is actually for the family and thus results in a payroll deduction of $850/month (about 16 percent of your household income), your policy is still deemed “affordable” because the $90/month that you pay for just your own coverage is about 1.7 percent of your household income, which is well under the 9.78 percent limit. This situation is known as the “family glitch” — you can read more about it here.

Medicaid or CHIP might be an option

But the good news is that your kids may qualify for coverage under Medicaid or the Children’s Health Insurance Program (CHIP). Income limits for Medicaid an CHIP eligibility vary considerably from one state to another, but in many states, eligibility extends above 250 percent of the poverty level. There can be restrictions on eligibility when employer-sponsored coverage is available (here’s an example from Utah), but your kids might end up being able to enroll in Medicaid or CHIP, so be sure to check with the exchange or the CHIP office in your state to inquire about your family’s specific situation.

And even though you won’t qualify for a subsidy in the state exchange, you might want to get quotes from the exchange for your husband — and for your kids if they’re not eligible for Medicaid or CHIP. It’s possible that you could find a full-price plan in the exchange (or off-exchange, since you’re not eligible for subsidies anyway) that’s less expensive than what you pay to add them to your plan.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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