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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Premium Subsidy for Retiree?

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Question: An earlier response here (from Oct.) indicated that retirees under age 65 who are eligible, but not enrolled in employer-sponsored coverage, can obtain premium subsidies in 2014 to purchase coverage through the CA exchange, even though they have access to a employer-sponsored health plan. I would like to take this approach. (I’m 62 and on a retiree plan for 2013 that I can continue next year if I wish. Instead, I’m contemplating a switch in Jan. to a plan on the CA exchange & planning to get a subsidy.) However, in registering, the website asks if I “have or have been offered affordable, minimum standard value health insurance for 2014?” The answer to this is “yes”, but someone at coveredca told me on the phone that if I answer “yes” it will disqualify me from any subsidy. I believe I’m entitled to the subsidy, but it appears the website will not allow it. What can I do?

Answer: If you have access to affordable employer-sponsored coverage, even for retirees, you are not eligible for as subsidy. Look at it this way: since your former employer offers you a group health insurance plan to which they contribute at lease 50% of the cost of coverage, you already have “subsidized” health insurance. Federal subsidies are for people who do not have that option.

3 Comments

Max, it seems you’re right. After posting the initial question, I’ve done a lot more research (including perusal of the Federal Register of May 3, 2013) and also talked to the folks at coveredca.com and healthcare.gov. As it turns out, retirees can decline retiree coverage (if done at the right time) and procure coverage through an exchange. They can also receive the tax credit to cut premium costs if other requirements (such as income level) are met.

The following question & answer (from http://kff.org/health-reform/faq/health-reform-frequently-asked-questions/?search-global=retiree#question-im-enrolled-in-cobra-now-but-i-want-to-drop-it-does-that-affect-my-eligibility-for-marketplace-subsidies) sum it up pretty well: Question: I’m 63 and enrolled in a retiree health plan from my former employer. Can I look for better coverage and subsidies in the Marketplace?

Answer: Yes, as long as you do so during the Open Enrollment period. People with employer-provided retiree health benefits should know that most early retiree health plans are considered qualified health plans, and thus meet an individual’s requirement for coverage.

If you are enrolled in such coverage, you can also look at coverage options through the Marketplace, and if your income is between 100% and 400% of the Federal Poverty Level, you may qualify for premium tax credits. However, there’s one exception. Some employers may provide retired employees with access to an account, called a health reimbursement arrangement or HRA, that the retiree may use to reimburse medical expenses, including an individual policy through a Marketplace or in the non-group market. A retiree that signs up for an HRA offered by a former employer is considered to have minimum essential coverage from an employer and would therefore would not be eligible to claim a premium tax credit if he or she enrolled in a Marketplace plan.

Remember that outside of Open Enrollment, you cannot voluntarily drop your retiree coverage and replace it with other coverage.

OOPS! That word should have been “IMMORTALIZED” == but immoralized might work, too. LOL.

One of the earliest documents to be published by the White House (whitehouse.gov) was titled: “Health Reform for Early Retirees — The Affordable Care Act Gives Early Retirees Greater Control Over Their Own Health Care” and in that document, the following consecutive statements were made on page 1:

More affordable Choices and Competition • Creates state-based health insurance Exchanges to provide the same private insurance choices that the President and Members of Congress will have, including multi-state plans to foster competition and increase consumer choice. Employer-based retiree coverage rarely offers any choice of plans.

One-stop Shopping – Putting Early Retirees in Charge • Provides standardized, easy-to-understand information on different health insurance plans available through the Exchanges and offered in a geographic region so Americans can easily compare prices, benefits, and

performance of health plans to decide which quality, affordable option that is right for them. Another failed promise from Obama to the people? Anyone seen a plan that is “the same as the President and Members of Congress will have”??

On a CIGNA website the following information can be found:

“What is the PPACA Early Retiree Insurance Program?

The PPACA created the Early Retiree Insurance Program, a temporary program, for employers providing health insurance coverage to retirees over age 55 who can’t get Medicare. The government offers employers a tax break for a portion of health benefits costs they give to retired employees ages 55 and over and their spouses, surviving spouses and dependents that can’t be on Medicare.

The program is over when the federal funds set aside are gone. The Department of Health and Human Services announced on April 1, 2011 that it could no longer accept applications for the program after May 5, 2011. Early Retiree Insurance Program funds will run out in late 2011 or early 2012.” So much for helping employers and their early retirees. Made it all the way to 7 months.

A private website, Hull Financial Planning says this:

“early retirees have three options for health care coverage:

Self-insure. If you get sick, go to the doctor and pay cash. Need a prescription? Go to the doctor and pay cash. Since insurers can no longer deny coverage, if you develop a condition that will require long-term care or will be expensive to treat, you can apply for coverage at that point, although you may have to wait up to 90 days before you are covered. There is a cost, besides what you’d pay out of pocket, for choosing this route. The ACA implemented an excise tax that is the greater of 1% of your modified adjusted gross income (MAGI) or $95 in 2014, rising to $695 and 2.5% in 2016. For the family making $75,000, that’s $750, rising to $1,875. If you’re healthy and rarely need medical or health care, this may be a viable option, assuming you have the assets to pay for catastrophic care. I can imagine a nightmare scenario where you’re in a single car accident and in an ICU for weeks or months, unable to move, much less apply for health insurance.

Get private health insurance. Just as people have done in the past, you could go to a private insurer and get regular health insurance. Although I am neither an actuary nor an insurance expert, I would not be surprised to see, relative to the healthcare exchanges provided under Obamacare, rates drop slightly, as the high risk purchasers will move to the public exchanges, lowering the risk profiles of those seeking private insurance. Don’t quote me on that one, please.

Go onto the public exchange and get health insurance. With the opening up of the exchanges on October 1, 2013, early retirees will have another option for receiving coverage.” Cleverly, none of these excerpts mention the possibility of tax credits for early retirees.

So what is the final authority? Let’s try 26 USC Sec. 36B and subsection (c)(2)(c), which states:

“(C) Special rule for employer-sponsored minimum essential coverage

For purposes of subparagraph (B)—

(i) Coverage must be affordable Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage—

(I) consists of an eligible employer-sponsored plan (as defined in section 5000A (f)(2)), and

(II) the employee’s required contribution (within the meaning of section 5000A (e)(1)(B)) with respect to the plan exceeds 9.5 percent of the applicable taxpayer’s household income.

This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship the individual bears to the employee.

(ii) Coverage must provide minimum value Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage consists of an eligible employer-sponsored plan (as defined in section 5000A (f)(2)) and the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.

(iii) Employee or family must not be covered under employer plan Clauses (i) and (ii) shall not apply if the employee (or any individual described in the last sentence of clause (i)) is covered under the eligible employer-sponsored plan or the grandfathered health plan.

(iv) Indexing In the case of plan years beginning in any calendar year after 2014, the Secretary shall adjust the 9.5 percent under clause (i)(II) in the same manner as the percentages are adjusted under subsection (b)(3)(A)(ii).” Clear as mud, right? Your Congress at work.

Here’s my take, for what it’s worth. I do not see the word “retireee” anywhere in that section. Is a retiree an “employee” (the only type of person mentioned)?

When the Supreme Court interprets the USC, it looks to the plain language and says, “Congress could have chosen any words they wanted, but these are the words they chose” and looks also to the legislative intent.

Did Congress intend to lump retirees in with employees? I don’t have enough time to go digging through the Federal Register or Congressional Digest to find the answer to that. Some Supreme Court law clerk may get feather in his cap for doing that.

I personally don’t believe retirees are employees under the statutory definition of an employee. Therefore, I don’t believe retirees are compelled to enroll in an “employer-sponsored” QHP. If one is offered and they choose to do so, terrific, that’s one or two people off the government’s tax credit back.

I think the response to the question above is incorrect. Will the IRS have the time or talent available to research every person receiving a premium tax credit to determine whether they are eligible on the basis of anything else besides MAGI between 100% and 400% of FPL? I doubt it.

And what’s the worst that can happen? Have to repay the tax credits — even the IRS is not going to take a proactive approach to this, for the time being, they will only reclaim the disallowed credits from tax refunds due.

So go ahead and select NONE OF THE ABOVE as the answer to have you been offered anything for 2014. If your income is below 400% FPL (about $62,040 for a household of two), claim a tax credit and enjoy the health care while you can.

And maybe even plan on being the test case to the Supreme Court to determine whether retirees are employees or not. How exciting to be immoralized in the annals of the SCOTUS!

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