Definition of "Eligible" for the greater good

[Benefits 101]

I was conversing with an attorney and lamenting how the affordable care act really hurts lower wage working families. Consider the average family premium costs $14K per year, and most companies require a very large payroll deduction for family coverage.

A family of 4 making 55K per year with a payroll deduction of $11K per year, is harmed by the ACA because if they were allowed to get subsidies, they would pay far less on the Federal Exchange (about 4.1K per year for a silver plan).

So she said, why not just change the plan document to alter eligibility. And she of course qualified it as just a thought and an off the cuff one at that.

So, how about if we change the plan document to be: "If one is a full time employee and has a household income of less than 200% of FPL and has a household size of 3 or more, they are ineligible for the group health plan". The point of this is to make that employee eligible for the subsidies via the public exchanges. Most employees would be left in a better situation as a result of this.... except single mothers with free CHIP in many instances.

So how about: "If an employee would enroll into Company ABC's health plan as a family, and has a household income of less than 300% of FPL, they are ineligible fore the group health plan."

Since there is no 105(h) non-discrimination testing for fully insured plans right now, that isn't a factor. The group would have only a few people effected by it, so they still meet the insurance company's participation criteria. Thoughts? This is discrimination in favor of lower income earners IMO.

[GMK]

For the purposes of discussion,

While ACA may not help lower wage working families with coverage costs, aren't they in the same boat as far as costs go with or without ACA. They might be better off overall by switching to a different low paying job, one that doesn't offer health coverage, to get the subsidies. But I don't recall that lowering the employees' cost of employer-provided coverage was a goal of ACA.

Might the proposed eligibility changes put the employer at risk for the shared responsibility penalties of $3000 or $2000 per?

For my curiosity, what is the reference for the statement that most companies require a very large payroll deduction for family coverage? I understand that many companies are continuing to shift the costs to employees, but I'd be interested in seeing the numbers. Thanks.

[masteff]

Just as GMK wonder, Q&A-39 here http://www.sevenhillsservice.com/ftpgetfile.php?id=133 suggests the employer will still pay the penalty for an employee using the subsidy.

And the share an average worker pays for family coverage is 29% of the cost. http://kff.org/report-section/ehbs-2013-section-6/

[Peter Gulia]

Benefits 101 is right that some employees would be better off not getting an employer's offer of affordable (within the meaning of IRC 4980H) health coverage. This is especially so if the employer's offer is affordable measured on employee-only coverage, and is not practically affordable for coverage that includes a dependent or spouse. (Some employee-benefits practitioners have been writing about this in the past few years.)

How about designing things so that a worker of the kind that Benefits 101 describes instead of having one 50-hours-a-week job gets two 25-hours-a-week jobs with employers that have no relationship to one another?

If both employers treat this worker as a part-time employee and so exclude her from any offer of coverage, would doing so help the worker get the IRC 36B credit?

Admittedly, this idea doesn't fit every business, because some would suffer productivity losses or other problems. But for some businesses that regularly manage scheduling part-timers, could this idea help some workers get health coverage?

[Benefits 101]

Thanks for the thoughts. It is one of the things I really dislike about the ACA. Usually the extra "marginal dollar" effects high wage earners, but this spins it so that low wage earners suffer.

Anyway, ethics aside, as for my statement that families pay a lot for coverage, I suppose I work with lower wage / benefits companies then. I commonly see: "the employer pays most of single rate, but nothing for dependents" in my area of the country. I mostly work with for-profit industries as well, not benefit rich non-profits. If I had to estimate, the payroll deduction for family coverage is about $700-$800 per month in my neck of the woods (just a very rough & general estimate).

Anyway, in 2014, why not.... no penalty right! Give these poor folks a break! In 2015, that non-tax deductible 4980H penalty is steep. But for smaller employers... why not? How is this kind of "Robin Hood" discrimination wrong?

P.S. Peter, I think the IRS has said "we are looking for companies working in co-hoots by making workers part time at both companies" (to paraphrase)... so it might be tough for that lower wage employee to pull that off. And just think about it, this poor guy or gal has to take a part time job, then what... a temp job? Where is the hope, the upward mobility, the American spirit.... ughhh, the polarization of wealth continues! From a practical sense, I think its difficult for low wage workers to pull of 2 part time jobs that would provide any kind of upward mobility (just my gut opinion).