Take My Coverage – PLEASE! An Obamacare Fairy Tale

Inspired by a true evaluation of options with one of my clients, this is the tale (set in the “not too distant” future) of a well-meaning employer and how he unwittingly hurt one of his best employees and his company – all while trying to do the best thing for his employee.  The new rules of PPACA bring surprising new motivations.  The names have been changed to protect the innocent!

Once upon a time, there was a hard working guy named John Jones.  John has worked for Good Guys, Inc. for 17 years now.  In that time, he has barely had a sick day and absolutely never comes in late.  He always makes the extra effort to do his job as well as it can be done – mindful of the impact to both Good Guys’ customers and other employees.  He has become an integral part of the business and an invaluable employee to the business owners.  In that time, he has also gotten married and had a couple of kids – and he is finally doing well enough to have his wife stay home with his young children.

Wanting to do what is best for John and other employees like him, Good Guys went through the effort of designing a benefit package and even contributing significantly to the cost of the insurance (as a 30 person company without a mandate to provide coverage, they felt this was truly a employee-centered decision).  As a matter of fact, Good Guys pays 95% of John’s employee-only premium (about $380 per month or $4,560 per year) – making his cost to participate as an employee only $20 per month.  This is obviously a very good deal for him.  It is also well within the PPACA employer mandates regarding affordability. 

Unfortunately, in order for John to cover his wife and children, it costs him an additional $700/month or $8,400 for the year.  John does well – making $50,000 per year.  But, this additional cost to cover his wife and children is very difficult to swallow – even at his income level.

Here is where it gets interesting. . .

John gets wind of these Health Insurance Exchanges and decides to check them out.  There, he discovers this (reference – Kaiser’s Health Reform Subsidy Calculator) and begins to click some boxes.

Once he enters his information, it is confirmed that:

“In general, full-time employees with employer coverage available that meets specified requirements are not eligible for premium subsidies, unless the employee would have to pay more than 9.5% of income for the employer-provided coverage.”

Well, that wasn’t exactly what he was hoping for.  Out of curiosity, he decided to change his answer to the question, “Is employer coverage available” to “No” and this is what he saw:

Exhange Subsidy example

So, his employer’s very generous contribution of $4,560 per year for his health insurance meant he would need to pay more than $5,000 per year more for his family’s health insurance coverage.  His employer’s voluntary contribution to his health insurance excludes him from accessing more than$9,200 in Federal tax credits for the cost of his family’s coverage.

Now, the best thing that employer could do for that employee would be to drop his current group health plan or drop this employee to part-time to make him ineligible.

Now, I am pretty sure this is not what was intended by Health Reform.  But, this will be a reality for employees and small employers in 2014 – when these Federal subsidies are fully enacted.  It does make you wonder how something like this could come to be – or if it will be addressed somehow.

Stay tuned!

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