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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.


Small Group Coverage Includes Dependents?

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Question: My husband is insured through his employer here in California. There is a very small staff (under 10). I have not been offered health coverage, for my husband says that the employer is not obligated to offer it to me, or our son. Is this true? I have read conflicting items online. Thank you.

Answer: It is virtually certain that your husband's employer-sponsored small group coverage includes coverage for dependents even though you may find it unaffordable because the employer is not required to make any contribution toward dependent coverage. That means you have "access" to small group coverage and are probably ineligible for premium assistance and cost-sharing reductions through Covered California. However, if you cannot enroll in your husband's plan now due to being outside the plan's open enrollment period, I see no reason that you can't enroll in CC with premium assistance until you can be added to his employer's plan at the next plan renewal.

Currently in California, SHOP and Cal Choice are the only sources that allow groups to offer coverage to employees without including dependents. Your husband's employer should consider changing coverage to SHOP or Cal Choice and elect "employee-only" coverage. That will free all the dependents to eligibility for premium assistance and cost-sharing reductions through Covered California. If the employer goes with SHOP, the company may be eligible for small group tax credits as well. Employers should contact their broker for more information.

15 Comments

On employer-based coverage for dependents, eee http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act On Feb. 10, 2014, the IRS and Treasury issued final regulations on the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code. The following questions and answers provide helpful information about the guidance: 19. How does an employer know whether the coverage it offers is affordable? If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee. Because employers generally will not know their employees’ household incomes, employers can take advantage of one or more of the three affordability safe harbors set forth in the final regulations that are based on information the employer will have available, such as the employee’s Form W-2 wages or the employee’s rate of pay. If an employer meets the requirements of any of these safe harbors, the offer of coverage will be deemed affordable for purposes of the Employer Shared Responsibility provisions regardless of whether it was affordable to the employee for purposes of the premium tax credit. 21. If an employer offers health coverage that is affordable and that provides minimum value to its full-time employees and offers health coverage to the dependents of those employees, will it be subject to an Employer Shared Responsibility payment if some of its employees purchase health insurance through a Marketplace or if some of its employees enroll in Medicare or Medicaid? No. An applicable large employer will not be subject to an Employer Shared Responsibility payment solely because one, some, or all of its employees purchase health insurance coverage through a Marketplace or enroll in Medicare or Medicaid. An employer will not be liable for an Employer Shared Responsibility payment unless at least one full-time employee receives a premium tax credit. In general, an employee will not be eligible for a premium tax credit if the employer has offered that employee health coverage that is affordable (see question 19) and that provides minimum value (see question 20), even if that employee rejects the offer of coverage and instead enrolls in coverage through a Marketplace or enrolls in Medicare or Medicaid. If no full-time employee receives a premium tax credit, the employer will not be subject to an Employer Shared Responsibility payment. 23. If an employer offers health coverage that is affordable and that provides minimum value to its full-time employees and offers health coverage to the dependents of those employees, will it be subject to an Employer Shared Responsibility payment if some of its employees purchase health insurance coverage for their dependents through a Marketplace or if some of its employees enroll their dependents in Medicare or Medicaid? No. An applicable large employer will not be subject to an Employer Shared Responsibility payment solely because one, some or all of its employees purchase health insurance coverage for their dependents through a Marketplace or enroll their dependents in Medicare or Medicaid. An employer will not be liable for an Employer Shared Responsibility payment unless a full-time employee receives a premium tax credit. If no full-time employee receives a premium tax credit, the employer will not be subject to an Employer Shared Responsibility payment. If an employer offers health coverage that is affordable (see question 19) and that provides minimum value (see question 20) to the dependents of its full-time employees, those dependents will not be eligible for a premium tax credit.

*43. When can an employee receive a premium tax credit? The premium tax credit generally is available to help pay for coverage for employees who • have household income between 100% and 400% of the federal poverty line and enroll in coverage through a Marketplace, • are not eligible for coverage through a government-sponsored program like Medicaid or CHIP, and • are not eligible for coverage offered by an employer or are eligible only for employer coverage that is unaffordable or that does not provide minimum value. 44. If an employer does not employ enough employees to be subject to the Employer Shared Responsibility provisions, does that affect the employees’ eligibility for a premium tax credit? No. The rules for how eligibility for employer-sponsored insurance affects eligibility for the premium tax credit are the same, regardless of whether the employer is subject to the Employer Shared Responsibility provisions. 49. Although my company offers all its full-time employees and dependents health insurance coverage, one of my employees’ dependents enrolled for coverage in the Marketplace and received a premium tax credit - does my company have to make an Employer Shared Responsibility Payment? An applicable large employer will not be subject to an Employer Shared Responsibility payment solely because one, some, or all of the dependents of its full-time employees receive health insurance coverage through a Marketplace and receive a premium tax credit. An employer will potentially be liable for an Employer Shared Responsibility payment only if a full-time employee enrolls in coverage through a Marketplace and receives a premium tax credit. If no full-time employee receives a premium tax credit, the employer will not be subject to an Employer Shared Responsibility payment.

If an employer offers health coverage to its full-time employees and their dependents and that coverage is affordable and provides minimum value with respect to the full-time employees, those dependents will not be eligible for a premium tax credit. 50. I own a business with fewer than 50 full-time (including full-time equivalent) employees. I offer insurance that is generally affordable and minimum value. However, for one employee it’s unaffordable and he goes to the Marketplace for insurance and gets advance payments of the premium tax credit—do I have an employer shared responsibility payment? No. Employers that employ fewer than 50 full-time employees (including full-time equivalents) in their businesses for the prior year are not subject to the Employer Shared Responsibility provisions. The vast majority of businesses fall below this threshold. In addition, for employers with fewer than 100 full-time employees, the preamble to the final regulations for the Employer Shared Responsibility provisions provides transition relief for 2015. Employers with at least 50 but fewer than 100 full-time employees (including full-time equivalents) in 2014 that meet conditions described in the preamble to the final regulations will not be subject to any Employer Shared Responsibility payments for 2015 (or for the 2015 plan year in the case of an employer with a non-calendar-year health plan). 52. I own a business that is subject to the Employer Shared Responsibility provisions; however, all of my employees obtain other health insurance coverage. Do I still need to offer insurance to them to avoid an Employer Shared Responsibility payment? Yes. An applicable large employer must generally offer coverage to its full-time employees (and their dependents) even if the employee is eligible for coverage from another source, to avoid a potential Employer Shared Responsibility payment. An applicable large employer may be subject to an Employer Shared Responsibility payment if the employer does not offer health coverage to its full-time employees (and their dependents) and at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on the Marketplace. If an applicable large employer does not offer coverage to its full-time employees (and their dependents) or offers coverage to fewer than 95% of its full-time employees (70% in 2015 as a transition) (and their dependents), and at least one full-time employee receives a premium tax credit, the employer will be liable for an Employer Shared Responsibility payment, which will be calculated based on the employer’s number of full-time employees. For this purpose, all full-time employees are counted, including those who are eligible for coverage from another source. (See Q&A 48, above, for a 2015 transition rule under which an employer that takes steps during its 2014 and 2015 plan years toward offering dependent coverage may not be subject to an Employer Shared Responsibility payment solely on account of a failure to offer coverage to dependents.) An employer may owe an Employer Shared Responsibility payment only if one or more full-time employees receive a premium tax credit. Individuals (including employees) who are eligible for Medicare or Medicaid are generally not eligible for a premium tax credit. Thus, if all of an employer’s full-time employees are eligible for Medicare or Medicaid, the employer will not be subject to an Employer Shared Responsibility payment. However, if even one full-time employee receives a premium tax credit, the employer may be subject to an Employer Shared Re

Paul, No- Qualification for MEDI-CAL is completely separate from Covered California as well as Affordable Care Act Subsidy Eligibility rules.

Log onto IRS web site and Search Employer Mandate Q&A, this exact scenario if referenced late in the Q&A, around question 40-45 off the top of my head.

If you email me anne@kellyandkellyinsurance I will email you back a TABLE that shows 2015 Income Guidelines for single and families, and notes Medi-CAL eligibility Incomes as well as Covered CAL eligible Incomes. We don’t have to worry about the Medi-CAL eligible. They need to be directed to apply for Medi-Cal. Large Employers will not be fines Penalty for those employees that go on Medi-Cal. Those same employees, will not be disqualified from Medi-Cal if their Large or small Employer provides benefits, whether or not those benefits meet affordability.

Bottom line is TREAT MEDI-CAL as SEPERATE from ACA. They only come in to the picture as “NOT Being Part of the Picture”.

Employees who do not qualify for Medi-CAL, who have “Affordable coverage ” available through an Employer ( Large or small, doesn’t matter) do not qualify for COVERED CAL subsidy. If their dependents are offered coverage through that Employer ( Large or small doesn’t matter) then they too are Disqualified from Subsidy through Covered California.

Jan/Feb 2015, everyone gets a 1095C form that must be included in TAX RETURN. This form will TRIGGER IRS Denial of Subidies, Individual mandate penalties if you can’t provide that form, as well as Large Employer Penalties if an Employee got a Covered California Subsidy and IRS determines the Large Employer did not offer Affordable Coverage. IRS are not stupid, If the employee submits W2 they can check Income and double check with Employer if coverage was offered and if it was Affordable.

Remember IRS can audit back years. Our clients run the risk of owing thousands of subsidy monies back if IRS denies subsidies and places liens on them for Subsidies plus interest.

The checks and balances for Penalties both Individual mandate, and Large Employer Mandate as well as Subsidy eligibility will be done by IRS.

Your Employer clients will not thank you if they get flagged for an audit, your Employee clients will not thank you if they get flagged for an audit, so why are agents continuing to circumvent this eligibility clause in the ACA regs.

Personally, I have little if no respect for ACA, It’s unaffordable to Americans, will create a Class divide like no other predecessor, will reak Claims havoc and out of pocket expenses that few can afford, does little to serve the sick, in fact I would venture to say it will have adverse affect on outcomes as many will forgo treatments and prescriptions because of unaffordability.

But I do have a respect of IRS. They will pursue these penalties and subsidy denials, and when they do Ignorance of the law will not be an acceptable excuse.

If an employer offers “affordable” coverage for employee-only coverage but the family cannot afford the full-price dependent coverage and the family income is below the Medi-Cal eligibility threshold, is the family still eligible for Medi-Cal? Is the employee disqualified from Medi-Cal by the “affordable” employer plan? If so, are the wife and kids eligible for Medi-Cal?

Anthony, we’ve had a lot of discussion on this topic over the last year. To get briefed, search cahba.com for “9.5% affordability”.

Running into prospects who have insurance at work but are complaining that to cover non employee spouse it is too expensive.. I spoke with Covered California and tried to see if the lack of affordability, the 9.5% rule could be applied. I am not sure how it works. Is it only the employee spouse’s premium that has to be unaffordable, not the total premium that they have to pay for spouse and /or dependent children Let me know what you can think of how to solve this issue, if it can be thank you

Deborah - Per the IRS, Look under Affordable Care Questions and Answers - Employer- Regardless as to what size the Employer is , Large or small. If an employee is offered “Affordable” Minimum Plan, and the cost of the lowest cost plan available to the employee on an Employee ONLY contribution is less than 9.5% of his or her Income, then if coverage through that employer is available to dependents ( Regardless as to whether that employer Pays towards dependent Coverage. ) Then the dependents are NOT Eligible for Covered CA Subsidy. If in this case the dependents get a COVERED CA subsidy in error, the IRS can later deny it and lien for the full amount plus interest. In this same scenario, the Employer if large group mandate applies will not be penalized as the Employer met the mandate by offering “Affordable Minimum Value Coverage to the Employee. Bottom line for Large Employers is the the TRIGGER for IRS Penalty is AN EMPLOYEE Legitimately getting Subsidy on Covered CA.

Lacey, if the dependents are already on Medi-Cal, let sleeping dogs lie. If not, you have to listen to what Covered California is telling you.

Phil-

I understand that these dependents are not eligible for subsidies on CC. HOWEVER, can the dependents get Medi-Cal? I am a certified CC agent and a health broker, and I’m having difficulty finding someone who can give me a strait answer… Employer offered “affordable” self-only coverage, but employee is required to pay 100% of dependent premium, and the employee cant afford it. So, they decline the group coverage for the dependent so they can get (or keep) their Medi-Cal for their defendants. I’ve been told by CC advisers that these people cannot get Medi-Cal either, and if they try and qualify, they will be caught up next year at tax season and penalized. What have you heard?

Anne, employees who decline group coverage to enroll in subsidized individual coverage by gaming the system are indeed opening themselves to IRS demands for back taxes, penalties, and interest in the future. Just because they can get away with it now, does not prevent the IRS from coming after them later. On the other hand, there are legitimate instances when employees or their dependents cannot enroll outside of their group’s open enrollment period and in that case they are eligible for MediCal or subsidized coverage until their next employer-sponsored open enrollment.

Phil:

Just logged into your site to see if you had thoughts on this question. I am hearing a few Certified Covered CA agents say that an employee who declines his small Employers AFFORDABLE MINIMUM VALUE insurance can get around being disqualified for subsidies for his family by doing so and then signing up for Covered California later. Most of my small groups renew DECEMBER 1st for reasons I don’t need to clarify with you. Open Enrollment for Covered CA is Nov 15-Dec 15. Open Enrollment for small group effectively accepts apps dated through dec 31st. So how can they get around this ? And what’s stopping the IRS from denying the subsidy later ?

Deborah, for more detail on my answer, please search this site for “9.5% affordability” and you will find many archived entries dealing with this subject.

can you tell me where to look for your answer about the employer for small group under 50. Must offer dependents/spouse and they must go on and pay 100% of the prem with out assistance. I am getting calls re: this,and the employee really can t afford adding their dependents/spouse.

Deborah, the IRS sets the “affordability” at 9.5% of income for the employee-only cost of coverage. Since the employer must pay at least 50% of the coverage for employees, it’s rare that the ee cost will exceed 9.5% of income. That’s the “formula” to which you referred.

I was told ,if the employee can not afford coverage for his spouse/dependents ,there is a formula if it s over his income, and the employer does not pay any part, then spouse and dependents could go to the CC and qualify? Can you be clear on this. Your answer is conflicting with what was mentioned in CIA training .

Brokers: The situation described in this Q&A entry is not widely known. It represents a great opportunity for new small-group business as well as providing value to your current groups especially those with low-income employees.

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