Options Exist For Employees Who Do Not Like Their Employers’ Health Insurance Coverage

What can an employee who gets employer-sponsored coverage at work, but does not like it, do? Now that the health insurance marketplace is up and running, can these employees obtain coverage via a state health insurance exchange? Can they go without insurance altogether and just pay the individual mandate penalty for failing to have insurance?

Most people can buy health insurance via the state exchanges, starting for 2014. Some people—those with incomes up to 400 percent of the federal poverty level—might be able to qualify for subsidies to make this coverage more affordable. However, not everyone within this income level will qualify for these premium tax credits.

Limited availability of subsidized coverage. Individuals whose companies offer employer-sponsored health coverage but who choose to buy their insurance on an exchange, instead of obtaining it from their employers, may not qualify for government subsidies, even if their income fits within the 400 percent of the federal poverty level threshold, except in certain circumstances. If the employer-provided health coverage is (1) inadequate or (2) unaffordable, subsidized coverage might be available for employees who opt to buy their insurance on the exchange.

Employer-provided health insurance is considered inadequate if it does not provide coverage for at least 60 percent of the employee’s allowed medical costs. The insurance is considered unaffordable if the coverage costs more than 9.5 percent of the employee’s income.

Forego insurance totally? An employee who does not want to buy insurance either through his or her employer or via the health insurance exchanges may choose to forego insurance altogether and just pay the penalty. In 2014, the penalty is the greater of: (1) $95; or (2) 1 percent of the employee’s household income. Keep in mind, however, that the penalty will go up in subsequent years. In 2015, the $95 penalty amount increases to $325 and in 2016, it goes up again to $695. Starting in 2017, that $695 amount will increase for inflation. The “1 percent of the employee’s household income” portion of the penalty will also increase in subsequent years. In 2015, it increases to 2 percent of the employee’s household income and, in it goes up to 2.5 percent of the employee’s household income for tax years after 2015.

Open enrollment restarts on Nov. 15, 2014. Also keep in mind that the open enrollment sign-up period for insurance via the health insurance exchanges continues only through March 31, 2014. If an employee gets sick after that date and needs insurance, subject to certain exceptions for people experiencing life events that give them special enrollment rights, the next open enrollment period for the exchanges does not begin again until Nov. 15, 2014 and that is for coverage beginning in 2015.

Visit our News Library to read more news stories.