How to Find out If Your Employer’s Health Plan Is Good Enough

On March 5, the Department of the Treasury and IRS issued final rules on how employers report their employees’ health insurance. This was the last of a series of rules needed for implementing the requirement that large employers provide health insurance to their workers, or pay a penalty if they do not.

The rule describes a notice that employees will get at tax time. This is one of several notices that employees will get that: a) help employees determine if they have the health coverage they need to avoid tax penalties; and b) let them know if they might be eligible to buy a marketplace plan with premium credits instead of taking their employer’s coverage.

If you have comprehensive health coverage from an employer, the government, or that you buy, you will not be subject to penalties. But if you are uninsured for more than three months, or if you only have very limited coverage—such as coverage that only pays for cancer care or that only pays a fixed dollar amount when you are in the hospital or that only gives you a discount on medical services—you could face a tax penalty. While the documents that employees will receive are helpful, some employees will still struggle to get needed information.

Who can get premium tax credits in the health insurance marketplace instead of taking their employer’s plan?

If your job does not offer a health plan that provides “minimum value*” and that is considered “affordable”, and you have a low or moderate income, you might be able to buy a qualified health plan in the marketplace and get premium credits to help pay the cost.

To get financial help paying your monthly premium for a marketplace plan instead of taking your employer plan, you also have to enroll during an open enrollment period (before March 31, 2014, or between November 15, 2014 and February 15, 2015) or during a special enrollment period (if you get married, have a child, lose other health coverage, or face certain other special circumstances).

*A plan must pay at least 60 percent of the cost of typically covered medical expenses, on average, in order to be called “minimum value.” 

If the employer does not offer at least one health plan that is minimum value, the employee can reject the employer’s plans and instead go to the marketplace to get premium credits. The test of whether the plan is “affordable” is whether it would cost the employee 9.5% of his or her income or less in premiums just for himself or herself. (Unfortunately, this test does not take the cost of family coverage into account.)

So how do you get information about whether one of the plans offered by your employer meets these tests? There are several ways.

How to see if your employer’s health plans are considered “affordable” and “minimum value” under federal regulations

• Use the employer coverage tool
  Healthcare.gov provides a form that you can ask your employer to complete. On it, the employer can indicate the value of the health plans he or she offers, the cost, when employees can join the plan, and whether the plan is likely to change in the coming year. Employers are not required to help you fill out this form by any law or rules, but most will help.
• Notice of health coverage options
  Last October, employers covered by the Fair Labor Standards Act had to give notice to all of their current employees about their health coverage options. Employers that do $500,000 worth of business, as well as schools, nursing homes, hospitals, and governments, are among those covered by the Fair Labor Standards Act. The model notice, which you can find on the Department of Labor’s website, included information about the marketplace, disclosed whether the employer’s health plans met minimum value, and provided information about the cost of the lowest price plan offered by the employer that met that value. Going forward, employers must provide this same notice to all new employees within 14 days of hire
• Consult the Summary of Benefits and Coverage
  This is a straightforward document that explains what medical services a health plan covers and the costs (deductibles, copayments, and co-insurance) a person in that plan would pay. On page 4, the form answers the question “Does this plan meet the minimum value standard?” You should get this summary when you enroll in a health plan. You can also ask for summaries for any health plan you are considering, and the plan must provide the information. It is available in several different languages.
• Your employer will provide certain forms at tax time
  Beginning in 2015, large employers must provide completed forms to their employees (usually a 1095-C) that verify what months the employee had minimum value coverage. This form is provided at the end of the year, so it explains what health coverage you were offered the previous year. If you had comprehensive health coverage for at least nine months of the year, you met your obligation to have coverage, and the form you get from a large employer tracks the months you had this coverage. These employers also provide a summary notice to the IRS showing which employees they covered and listing the cost to employees of the lowest priced plan that provides minimum value coverage. This summary notice also lets the IRS know if the employer met its obligation to provide health coverage or is subject to penalties. If you worked for a small employer, you will also get a form stating which months you had coverage; however, that form might come from either an insurance company or your employer.

Do your research to determine whether you could receive help paying your monthly premiums

If your employer did not offer minimum value coverage and you instead enrolled in a marketplace health insurance plan, you may be entitled to financial help paying your monthly premium (also known as premium credits). You may have already taken all of your premium credits in advance to lower monthly premiums during the year, but if not, you may be able to get a premium credit when you file your taxes.

While the various notices you get from your employer may seem complicated, you can use them to your advantage. These notices can help you determine whether your employer offers the health coverage you need or whether you should buy a different health plan, for which you might be eligible for premium credits.