As crazy as it might sound at first, you should be asking your employer, "Could you please cancel our group health insurance plan?"
Why? Because if you are offered qualified affordable group health insurance by your employer, you and your family are disqualified from receiving the federal subsidy, even if you are eligible based on your income.
Group health vs. individual coverage
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Let's say you live in Dallas, Texas, earn $60,000 per year, and have a family of five. Your employer may offer you an group plan where your employer pays the full $500 per month cost per person for you, and you pay for your four family members at a monthly cost of $1,200 a month. That's $14,400 per year out of your pocket to have your entire family of five covered by the group health insurance plan.
Alternatively, on the Texas Health Insurance Marketplace (available via www.healthcare.gov), you could purchase individual coverage with an individual Blue Cross Blue Shield Silver Plan for all five family members including you without any government subsidy for $899 per month – that's for permanent health insurance, $30 copays for doctor visits, and $0 for generic prescriptions. That's $10,788 ($899 × 12) a year before the federal subsidy for better coverage than the $14,400 per year you would pay just to add your family to the group group plan.
But, if your employer didn't offer you qualified affordable group coverage, you would receive a $580 per month federal subsidy towards paying the $899 per month cost, reducing your monthly premium to $319 per month for all five members of your family. This $580 per month subsidy is effectively a $6,960 tax-free cash gift for you and your family from the federal government.
If your employer has less than 50 employees, there is no charge or penalty to your employer for you to receive this subsidy. But, if your employer has more than 50 employees, the employer would have to pay a penalty of up to $3,000 per year for each employee that receives subsidized coverage (up to a maximum penalty of $2,000 per year for all employees after a 30 employee credit).
It gets even better if you earn $40,000 per year and your employer doesn't offer an group plan—you would get free coverage for your entire family under Medicaid.
If you earned $80,000 per year versus $60,000 per year, your federal subsidy would fall from $580 per month to $312 per month, causing your $899 per month premium before subsidy to fall to $587 per month. Even if you earned $80,000 per year, your annual cost for much better, permanent individual coverage would be $7,044 per year ($587 × 12) for all five members of your family versus your employer charging you $14,400 per year just to add your family members to their group group plan.
What's the solution?
You should switch to individual health insurance because it's federally subsidized. With an individual plan, you may be eligible for a $2,000 to $12,000 per year share of the trillion-dollar federal subsidy.
(Look for our profile of Rick Lindquist in coming months and please join us at Benefits Selling Expo from May 19-21 in Scottsdale, Arizona, where Lindquist – among many others – will be presenting.)
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