Affordable Insurance: Am I Covered?

Whether or not your insurance is considered affordable depends on a variety of factors, including the type of insurance, your income, and the number of people covered by the plan. In the US, large employers (those with 50 or more full-time employees) are required to offer comprehensive, affordable health insurance to full-time employees (30+ hours per week) or face a financial penalty. Affordable Care Act (ACA) guidelines state that insurance is considered affordable if the cost for employee-only coverage is no more than 9.12% of the employee's household income in 2023. This percentage is indexed for inflation each year and has fluctuated since it was first introduced in 2014. For 2024, a job-based health plan is considered affordable if the employee's share of the monthly premium in the lowest-cost plan offered by the employer is less than 8.39% of their household income.

Job-based health plans

Job-Based Health Insurance Plans

Job-based health insurance is typically considered the best option for individuals, as it is often more affordable than individual plans. This is largely due to the fact that employers usually subsidise a significant portion of the total premiums for their employees' coverage. In addition, most job-based plans meet the minimum value standard, which requires that at least 60% of medical costs are covered, including substantial coverage of hospital and doctor services.

However, affordability is a subjective measure as it depends on a person's income. As of 2024, a job-based health plan in the US is considered "affordable" if the employee's share of the monthly premium for the lowest-cost plan offered by their employer is less than 8.39% of their household income. If the premiums are considered affordable for the employee, but not for other members of their household, then only the other household members may qualify for savings on a Marketplace plan.

If you are considering a job-based health insurance plan, there are a few steps you can take to determine whether it is affordable for you:

• Determine the Actuarial Value of the Job-Based Health Plan: The actuarial value of a health plan tells you what percentage of yearly healthcare expenses, on average, the health plan pays for. This can be found out by contacting your employee benefits or human resources department, or by calling the customer service number for the job-based health plan.
• Compare Job-Based Health Plan and Marketplace Plan Actuarial Values: Once you know the actuarial value of the job-based plan, you can compare it to Marketplace plans of a similar value.
• Determine Your Costs for Marketplace Plans: To determine your costs for Marketplace plans, you will need to enter your age, location, and whether or not you smoke into the online health insurance exchange portal.
• Compare the Cost of Marketplace Plans vs. Job-Based Health Insurance: Once you know the costs for both options, you can make an informed decision based on your budget and needs.

It is important to note that if you have an offer for job-based health insurance, you may no longer qualify for savings on a Marketplace plan, even if you don't accept the job-based coverage. Additionally, if you are offered health insurance by your employer, you are generally not eligible for a Marketplace subsidy unless the health insurance offered is unaffordable or does not meet the minimum value standard.

Employer-sponsored health insurance

The significance of employer-sponsored health insurance lies in its ability to provide financial protection and access to healthcare services, helping employees maintain their health and well-being. It reduces the financial burden of medical expenses, offering peace of mind and ensuring employees can seek necessary medical care without incurring exorbitant costs.

There are several types of employer-sponsored health insurance plans, each with its own features and cost structures:

• Preferred Provider Organization (PPO) plans offer flexibility in choosing healthcare providers, allowing visits to both in-network and out-of-network doctors without a referral. In-network care is less expensive, with fixed copayments or coinsurance, while out-of-network care is usually more costly. PPO plans are known for their flexibility but tend to have higher premiums.
• Health Maintenance Organization (HMO) plans require the selection of a primary care physician and generally need referrals to see specialists. They have lower premiums and out-of-pocket costs compared to PPOs, but the network of doctors and hospitals is typically more limited.
• High Deductible Health Plans (HDHP) come with higher deductibles and lower premiums. They are often paired with Health Savings Accounts (HSAs), allowing tax-free savings for medical expenses. While monthly premiums are lower, higher out-of-pocket expenses must be covered before the plan starts contributing. Preventive care is usually fully covered.
• Exclusive Provider Organization (EPO) plans combine features of both HMOs and PPOs. They have a network of preferred providers, but a primary care physician or referrals for specialists are not required. Out-of-network care is generally not covered unless it is an emergency.
• Point of Service (POS) plans are similar to HMOs but allow visits to out-of-network specialists without a referral in some cases. They require a primary care physician and have a network of preferred providers.
• Individual Coverage HRAs (ICHRA) are group health plans based on a predetermined monthly employer contribution that employees can use to purchase individual health insurance coverage.

The affordability of employer-sponsored health insurance is determined by whether the employee's portion of the premiums exceeds a certain percentage of their household income. This percentage is indexed for inflation and has changed over the years, with 9.12% being the figure for 2023.

To comply with the employer mandate, the coverage must also provide minimum value, which means that the plan covers at least 60% of average medical costs and provides substantial coverage for inpatient care and physician services.

Employers benefit from providing health insurance as it can attract and retain talented employees, boost morale and productivity, and offer potential tax incentives. However, they face challenges such as rising costs, administrative burdens, regulatory compliance, and meeting diverse employee expectations.

Premium tax credits

To get the premium tax credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit (PTC). You are eligible for the premium tax credit if you meet all of the following requirements:

• Have household income that falls within a certain range.
• Do not file a tax return using the filing status of Married Filing Separately.
• Cannot be claimed as a dependent by another person.
• Meet these additional requirements: In the same month, you or a family member:
• Enroll in coverage (excluding "catastrophic" coverage) through a Marketplace.
• Are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value.
• Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.
• Pay the share of premiums not covered by advance credit payments.

The amount of the premium tax credit depends on the estimated household income for the year you want coverage that you put on your Marketplace application. You can apply some or all of this tax credit to your monthly insurance premium payment. The Marketplace will send your tax credit directly to your insurance company, so you’ll pay less each month. This is called taking an "advance payment of the premium tax credit".

If your income goes up or you lose a member of your household, you’ll probably qualify for a lower premium tax credit. You may want to reduce the amount of tax credit you take in advance each month. This way, you don’t wind up taking more credits than you qualify for. If your income goes down or you gain a household member, you’ll probably qualify for a bigger premium tax credit. You may want to increase the amount of tax credit you take in advance so you have a lower premium bill each month.

If, at the end of the year, you’ve taken more advance payments of the premium tax credit than you’re eligible for, you may have to pay money back when you file your federal income tax return. This is called “reconciling” the advance payments of the premium tax credit and the actual premium tax credit you qualify for based on your final income for the year.

Essential health benefits

• Doctors' services, inpatient and outpatient hospital care, and ambulatory patient services (outpatient care you get without being admitted to a hospital).
• Prescription drug coverage.
• Pregnancy, maternity, and newborn care (both before and after birth).
• Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy).
• Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills).
• Laboratory services.
• Preventive and wellness services and chronic disease management.
• Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits).
• Birth control coverage and breastfeeding coverage.

Specific services covered in each broad benefit category can vary based on your state’s requirements. For example, some states require insurers to cover additional services and procedures, such as abortion services.

Out-of-pocket expenses

• Deductibles: The amount you pay each year for covered costs before your insurance coverage kicks in.
• Copayments: Fixed amounts you pay for covered medical services, such as a small fee for a visit to your primary care doctor or a specialist.
• Coinsurance: The percentage of costs of a covered health care service that you pay after you've paid your deductible.
• Non-covered services: Services that are not covered by your insurance plan, such as certain types of cosmetic surgery, non-prescription drugs, dental, and vision care.

It's important to note that not all out-of-pocket expenses count towards your deductible. For example, monthly premiums and copayments typically do not help you meet your deductible. Additionally, out-of-pocket expenses can vary depending on the type of health insurance plan you have, such as an HMO, PPO, or EPO.

To help make healthcare more affordable, the Affordable Care Act (ACA) has set maximum limits on out-of-pocket expenses. These limits, known as out-of-pocket maximums or out-of-pocket limits, cap the total amount you must pay each year for covered healthcare expenses. For 2024, the out-of-pocket limit for a Marketplace plan can't be more than $9,450 for an individual and $18,900 for a family.

Frequently asked questions