How to beef up your health coverage if your employer offers ‘skinny’ or unaffordable benefits

The majority of mid-size and large employers offer health benefits for their employees, and many small businesses do so as well. Four out of five employees recently surveyed say that health insurance is a ”must-have benefit,” and the good news is that most employers offer health benefits that are comprehensive enough to serve as a recruitment and retention tool. And most employers also pay the majority of the cost of the coverage, for employees as well as their family members.

The bad news is that some employer-sponsored health plans offer sub-par coverage – sometimes referred to as “skinny” plans. And some employers leave their employees with the bulk of the premium cost, especially if family members are added to the plan. The result can be employees with coverage that doesn’t measure up, or unaffordable payroll deductions for their coverage.

Suspect that your employer’s health benefits are “skinny” or unaffordable? Here’s how you can size them up – and how you can take steps to improve your situation.

How do you know if your plan is sub-par or unaffordable?

There are two main factors you can use to assess your benefits package – and they’re what you might expect:

• the extent to which your plan covers medical services and
• whether the plan actually ends up being affordable to you.

1. Does your employer’s plan offer ‘minimum value?’

Under the Affordable Care Act, large employers – employers with 50+ employees – are required to offer health benefits that provide minimum value to employees who work at least 30 hours a week. Employers who don’t meet this requirement are subject to the ACA’s employer mandate penalty.

But it’s important to understand that an employer-sponsored plan can have high out-of-pocket costs and still be in compliance with the minimum value rules. Large-group plans are not categorized by metal level the way individual and small-group plans are, and they do not have to cover the ACA’s essential health benefits. But a large-group plan that’s roughly similar to a Bronze-level plan – with a deductible of several thousand dollars – would be providing minimum value.

Some red flags of a plan that isn’t providing minimum value are low benefit caps for medical services, or limited coverage for major services such as inpatient care – for example, a plan that provides full coverage for preventive care, but only covers a few hundred or a few thousand dollars of an inpatient hospital stay. According to federal rules, a plan does not provide minimum value if it fails to provide “substantial” coverage for inpatient hospitalization or physician services.

If an employer’s plan does not offer minimum value, employees are eligible for premium tax credits that cover some, most, or even all of the premium for plans offered in the ACA marketplace (more on that below).

2. Is the health plan’s coverage considered affordable?

Employer-sponsored health coverage is considered affordable if the payroll-deducted cost for just the employee’s coverage doesn’t exceed a set percentage of the employee’s household income. Although most large employers do ensure that coverage for their full-time employees is considered affordable, there’s no requirement that employers pay any of the cost to add family members to the plan. Some employers choose to pass this cost along to employees in the form of a payroll deduction.

Families may have the option of choosing an ACA marketplace plan instead, but unfortunately, families in this situation are generally not eligible for premium tax credits. This is due to the “family glitch” and the way that affordability of employer-sponsored coverage is determined.

So just as a plan with high out-of-pocket costs can still be providing minimum value, a plan with a high monthly payroll deduction for the premiums might be meeting the ACA’s rules for affordability, even if the plan isn’t realistically affordable for the family.

ACA marketplace subsidies to the rescue?

The good news is that if you’re concerned about the quality or cost of the health benefits you’re being offered, you may find some relief through ACA marketplace subsidies.

To determine whether you’re potentially eligible for a premium tax credit, you’ll need to submit an employer coverage analysis form to your employer. This form asks an employer to indicate whether their health plan provides minimum value, and whether it meets the ACA’s affordability requirements.

If it does not, you will likely be eligible for a premium tax credit in the marketplace, depending on your household’s income. (You can use our subsidy calculator to see how much that subsidy would be.)

And it’s worth noting that if something about your situation or coverage offer were to change mid-year and result in the plan becoming unaffordable or no longer providing minimum value, you would qualify for a special enrollment period to switch to a marketplace plan.

So if you’re concerned about whether the coverage that’s being offered to you is adequate, it’s absolutely in your best interest to ask your employer to complete the employer coverage information form.

You may be better off declining your employer’s health benefits

If the employer’s plan does provide minimum value and is considered affordable, you might still decide that you’d rather purchase a different plan instead. But in that case, you wouldn’t be eligible for premium tax credits in the marketplace.

Depending on the circumstances, you might still find this to be preferable. For example, maybe you have a family member who needs extensive medical care, and you’d rather buy a marketplace plan with a lower out-of-pocket exposure for that family member. You might find that you come out ahead with this approach, despite having to pay the full premium for the marketplace plan.

Or maybe your employer payroll deducts the full cost to add family members to the plan, and your family is able to save money by purchasing a marketplace plan for the spouse and kids, despite having to pay full price.

If you’re taking this approach, it’s also worth checking to see if the kids would qualify for Medicaid or CHIP. Those programs are a lifeline for many families affected by the “family glitch,” making the family’s total coverage costs much lower than they would have been on the employer-sponsored plan alone. And although eligibility varies by state, many middle-class families will find that their kids are eligible for Medicaid or CHIP.

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 healthinsurance.org. Her state health insurance marketplace updates are regularly cited by media who cover health reform and by other health insurance experts.