The Affordable Care Act (ACA) requires each state to have a competitive marketplace, also known as an Affordable Health Insurance Exchange (Exchange), for individuals and small businesses to purchase private health insurance. According to the Department of Health and Human Services (HHS), the Exchanges will allow for direct comparisons of private health insurance options on the basis of price, quality and other factors and will coordinate eligibility for premium tax credits and other affordability programs.
All Exchanges will launch open enrollment in October 2013, with coverage becoming effective as early as Jan. 1, 2014.
Purchasing Coverage Through an Exchange
Beginning in 2014, all individuals who meet basic eligibility criteria may enroll in a plan through the Exchange of the state where they reside. An individual will be eligible for enrollment in a “qualified health plan” (QHP) through an Exchange if he or she:
- Is a citizen, national or non-citizen lawfully present in the United States, and is reasonably expected to remain so for the entire period for which enrollment is sought;
- Is not incarcerated; and
- Resides in the state covered by the Exchange.
Household income is not taken into account when determining whether an individual is eligible to enroll in a QHP through an Exchange. Likewise, an individual may be eligible to enroll in a QHP through the Exchange even if he or she is eligible for other minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan).
Affordability Programs for Purchasing Coverage Through An Exchange
Certain individuals who are applying for coverage will also be eligible for the ACA’s insurance affordability programs—health insurance subsidies in the form of premium tax credits and cost-sharing reductions—to help cover the cost of coverage through the Exchange. An additional set of eligibility criteria applies to these individuals. In addition to the eligibility requirements for purchasing coverage through an Exchange, these individuals:
- Generally must have household income for the year between 100 percent and 400 percent of the federal poverty line (FPL) for the taxpayer’s family size;
- May not be claimed as a tax dependent of another taxpayer; and
- Must file a joint return, if married.
In addition, the individual must enroll in one or more qualified health plans (QHPs) through an Exchange and cannot be eligible for minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan that is affordable and provides minimum value).
Regardless of whether an individual is eligible for the insurance affordability programs, he or she will still be eligible to enroll in a QHP through the Exchange as long as the basic eligibility requirements are met.
What This Means For Employers
Employees who meet the basic eligibility requirements for purchasing coverage through an Exchange will generally be permitted to waive employer-sponsored coverage and, instead, enroll in coverage through an Exchange. This is true regardless of:
- The employee’s household income;
- The employee’s employment status (full-time or part-time); or
- Whether the employee is eligible for other minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan).
However, only those employees who are not eligible for “minimum essential coverage” will be eligible for the affordability programs. Employees who may enroll in an employer-sponsored plan, and individuals who may enroll in the plan because of a relationship with an employee, are generally considered eligible for minimum essential coverage (thus, ineligible for the affordability programs) if the plan is affordable and provides minimum value.
This is significant for large employers that are subject to the ACA’s employer “pay or play” mandate, because the ACA’s employer mandate penalties are triggered only when a full-time employee receives a premium tax credit or cost-sharing reduction for coverage through an Exchange. An employee who is not eligible for the affordability programs may still be eligible to enroll in a QHP through an Exchange. However, this would not result in an employer mandate penalty for the employer.