My Employer Offers Health Insurance, But I Can’t Afford It

My employer offers health insurance, but it is too expensive. This sad refrain has several possible solutions.

People with large families and those working part-time or at small businesses can often buy coverage through the exchange.

Low-income families, pregnant women, and the disabled may find Medicaid a viable alternative.

Other times, enrolling in employer-subsidized medical insurance through your spouse is better when they extend premium contributions beyond the employee-only option.

If your employer offers health insurance, you do not have to take it. But learn the consequences and alternatives before declining the option during open enrollment.

My Employer Health Insurance is Too Expensive

Suppose your employer offers group health insurance, but you can’t afford it because it is too expensive. In that case, you could still get coverage elsewhere for you and your family members – and get government help lowering your costs.

Two rules under the Affordable Care Act (ACA) are crucial.

  1. 9.61% of household income for an employee-only plan – spouse and dependents premiums can be higher
  2. The minimum standard for employer-sponsored coverage – pays 60% or more of the total cost of medical services

Getting Medicaid

If your employer offers health insurance, you could still get Medicaid provided your household income falls under the federal poverty guidelines adopted by your state.

Workers with meager earnings often find their job-based coverage is too expensive per the ACA 9.61% rule for employee-only plans, possibly making them eligible for Medicaid.

Apply for Medicaid at your state agency or healthcare.gov website if you meet your state’s federal poverty guidelines, which have two components.  

  1. Modified Adjusted Gross Income: do not overstate
  2. Number of Household Members: do not understate

You will also have to show that you are a US citizen or have established legal immigration status. Pregnant women often qualify with even higher incomes.

Suppose you can’t afford your employer insurance and don’t qualify for Medicaid because you make too much money. In that case, you might still be eligible for premium tax credits to buy individual plans in the marketplace. 

Marketplace Exchange

If your employer offers health insurance, you can buy a plan on the exchange or online marketplace but may not qualify for premium tax credits that lower monthly costs.

To get the premium tax credits, you must demonstrate that your job-based coverage meets one of these two tests noted above: is unaffordable or fails minimum standards.

The ideal strategy differs for individual versus family coverage.

Individual

If your employer offers medical insurance, you can buy an individual plan on the exchange and may qualify for premiums tax credits if you work part-time or for a small business.

The (ACA) exempts two groups from the requirement to provide at least one plan costing less than 9.61% of household income for employee-only coverage.

  1. Part-time workers logging thirty hours per week or less
  2. Small businesses with less than 50 full-time equivalent workers

Family

If your employer offers medical insurance, you can buy a parent/child plan on the marketplace and still qualify for premium tax credits, making family coverage less expensive overall.

The ACA requires the employee-only plan cost less than 9.61% of household income but does not constrain the premiums for spouse and children coverage. Therefore, you could save a bundle by splitting plans.

Spouses can easily buy a parent/child plan on the exchange and qualify for premium tax credits if they are not working, their employer does not offer coverage, or the premiums are is too expensive.  

Working Spouse

Finally, if your employer offers unaffordable health insurance, you can enroll in your spouse’s group coverage if it costs less or offers better benefits.

This situation can arise when a husband works for a small business (not subject to the 9.61% rule) while the wife works for a large employer with generous benefits.

Employer subsidized health insurance does not always stop with the employee. The premium contributions often extend to family members (spouses and children) to attract and retain a competitive workforce via great benefits.

Many employers subsidize premiums for family members. For instance, you see this in competitive industries and those with union representation – especially government jobs.

Declining Employer Health Insurance

If your employer offers health insurance, you do not have to take it if you find it unaffordable. However, you should be aware of possible negative implications if you decline the group coverage option to save costs.

Paying for Treatment

You can decline medical insurance if your employer offers it because it is too expensive. You don’t have to take it. You save money on your share of the premiums but might risk your life or financial ruin if you become sick or suffer a severe injury.

For instance, you might be denied cancer treatment without insurance if you decline the group coverage to save a few bucks. If you cannot afford several hundred dollars for the monthly premiums, you probably lack the resources to pay for radiation and chemotherapy in cash upfront.

In other words, this is a gamble you cannot afford to lose.

Uninsured Penalties

If you cannot afford it, you can decline your employer’s medical insurance but could face penalties for being uninsured if you live in one of five populous states. Your choice could wind up backfiring, even when remaining perfectly healthy.

The federal government dropped the penalty for being uninsured years ago. However, five states impose hefty fines for people opting out.

  1. California
  2. Massachusetts
  3. New Jersey
  4. Rhode Island
  5. District of Columbia

Subsidy Penalties

While you won’t have to pay penalties for getting subsidies when you decline your employer’s health insurance offering to get Obamacare, you might have to refund some money.

When completing the application, you qualify for the premium tax credits based on your projected household income. However, when you file your tax return up to fifteen months later, you report your actual earnings for the year.

Therefore, your tax bill might be higher than expected if you underestimate future earnings when completing your initial application.