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Covered California Q&A

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.


Subsidy Eligibility When Employer Offers Coverage?

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Question: My employer offered me, my spouse and my children a employer sponsored minimum essential coverage effective 01/01/2016. If my spouse and my children decline the employer sponsored minimum essential coverage offer, are my spouse and my children eligible for Covered California subsidy when my household income is greater than 266% of Federal Poverty Level?

Answer: No. The fact that your spouse and children have been offered employer-sponsored health insurance makes them ineligible for premium assistance in Covered California even if household income is between 128% and 400% FPL.

4 Comments

What if somebody was getting premium tax credits on accident, not realizing their employer based coverage stopped them from getting subsidies legally? Would the full amount have to be payed back or would it be capped at a certain amount?

Justin, Yes. The IRS limits the amount of subsidy chargeback under the ACA. If the final annual income is below 200% FPL, then the chargeback is limited to $300 single ($600 family), with income between 200% and 300% FPL chargeback is limited to $750 single ($1,500 family), with income between 300% and 400% chargeback is limited to $1,250 single ($2,500 family). Taxpayers with final annual income above 400% FPL, the chargeback is 100%.

Aren’t there caps on how much of a subsidy has to be paid back?

Phil’s answer is essentially correct. However, if an employee’s “self-only” cost for health insurance is more than 9.5% of his/her Modified Adjusted Gross Income (which could be lower than 9.5% of his/her actual employment income) then it is considered “unaffordable” and the employee and dependents are permitted to go to the Exchange and obtain health insurance with Premium Tax Credits accordingly. In certain circumstances, it is possible that some dependents would find coverage at a lower premium than the employer’s plan, but a careful comparison of benefits and out-of-pocket expenses would be needed to determine whether it would be truly cost-effective to enroll in the lower-priced coverage.

If an employee whose self-only cost is NOT deemed unaffordable obtains health insurance through the Exchange with Premium Tax Credits, the employer is subject to a penalty of up to $3,000 per employee. The likelihood of this is rather small because employers also have a “safe harbor” that generally exempts them from the penalty if the employee’s premium cost is no more than 9.5% of gross pay. Most employers manage to design their plans so that the employees’ self-only cost of insurance is well below the 9.5% threshold. Unfortunately, the dependent cost does not factor into the 9.5% equation to any extent, and when faced with having to pay 100% of the cost, some employees cannot afford that.

It would be considered fraudulent for a dependent to apply for health insurance through CoveredCA, stating that he/she did not have “an offer” of employer-sponsored coverage in order to obtain premium tax credits to pay for a portion of the premium for individual coverage. The premium tax credits would have to be repaid in full to the IRS.

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