The Affordable Care Act of 2010 allowed millions of uninsured Americans to get health insurance through new state marketplaces. And when open enrollment for 2023 begins today, even more families can gain coverage thanks to a recent change in ACA rules.
Covered California, the state’s ACA marketplace, estimates the new rule could benefit 615,000 residents, most of whom are women and children. That’s on top of the 1.7 million who already have insurance through Covered California.
These are federal premium subsidies and something called the “family glitch.”
ACA subsidies limit health insurance premiums to a certain percentage of your household’s annual income. The less you earn, the lower the percentage you’ll have to pay—in fact, you could get coverage without a monthly premium if your income is close to the poverty line.
But the subsidies aren’t available to people who can sign up for affordable “minimum essential” coverage through an employer health plan. That’s roughly half the American population.
One of the few exceptions to this ban is for workers who would have to pay more than 9.12% of their income next year to get coverage at work. By the feds’ definition, such coverage is not “affordable.”
Basics of open registration
Covered California is a health insurance marketplace under the Affordable Care Act.
The open enrollment period is from November 1, 2022 to January 31, 2023.
Fill out an application or find someone to help you with the process at covered ca.com.
However, the Internal Revenue Service stated in 2013 that the affordability test only applies to the cost of an individual policy. If adding coverage for your spouse or your children pushed the cost of your family policy above the affordability limit, it didn’t matter – you weren’t eligible for premium subsidies.
In mid-October, the IRS finalized a rule that removes that loophole and allows workers to get subsidies for family coverage if it would cost more than 9.12% of their income to enroll everyone in their employer’s health plan. Although some critics say the new rule violates the ACA, some consumer advocates and members of Congress argue that the original IRS rule misunderstood the law’s intent.
Jessica Altman, executive director of Covered California, said the problem for many workers in the state is that their employer will help pay for their policy but not for their spouse and children.
According to UCLA and UC Berkeley estimates, nearly half a million Californians have employer-sponsored coverage that is less affordable than what they will be able to get now for California coverage, according to Altman. Another 87,000 Californians who could be helped by the new rule are uninsured today, and about 35,000 have policies that are not currently subsidized.
Read on to learn more about how the change will affect you and how to enroll in Covered California.
Am I entitled to premium subsidies?
The answer depends on your employer, your income and the amount you would have to spend on coverage, as well as the number of people in your household.
The first question is whether you can get comprehensive coverage from your employer—that is, a policy that includes 10 essential health benefits—at affordable rates. As stated above, this means a policy that costs less than 9.12% of your adjusted gross household income. This is all the taxable income you report on your federal return, plus certain amounts that have been deducted or excluded (such as student loan interest).
Most employer health plans are affordable for their employees because employers pay most of the bill. However, workers pay a significantly higher price for family coverage than individual coverage. According to the latest Kaiser Family Foundation survey, employees pay an average of $1,327 a year for individual insurance and $6,106 for family policies.
If the insurance premium from your employer for individual and family insurance is not available for you, your entire household is entitled to subsidies. And under the Inflation Reduction Act, the most you’ll have to pay for a standard “silver” plan is 8.5% of your adjusted adjusted gross income. The rest will be covered by subsidies.
(You can sign up for a different level of cover than what you’d find in the silver level, which is designed to cover 70% of your expected medical expenses. However, the amount of subsidy you receive is always based on the price of the second lowest silver plan in your region.)
If your employer’s premiums are available for individual coverage but family premiums are not, only your spouse and children will be eligible for subsidies through Covered California. So if you enroll your entire household in Covered California family coverage, you will be legally responsible for the unsubsidized cost of your portion of the coverage, which would likely be significantly more expensive than if you enrolled in separate individual coverage for the works. Your family members’ expenses will continue to be tied to a certain percentage of your household income, up to 8.5%.
According to James Scullary, spokesperson for Covered California, “90% of Covered California enrollees receive financial assistance that covers an average of 80% of their monthly premiums. As a result, two-thirds of our consumers can get comprehensive coverage for $10 or less per month.”
To get an unofficial estimate of how much help you might get from Covered California, check out the online calculators provided by the Kaiser Family Foundation and Healthinsurance.org.
(If your household income is at or below 138% of the federal poverty level, Covered California will help you enroll in Medi-Cal instead of a private insurance plan. For a single person, the income limit is $18,755; for a family of four, it’s $38,295 $.)
How do I register?
You can apply online at indoor ca.gov. The website also includes links to applications in 12 languages that you can print and send to the agency.
Alternatively, there are more than 11,000 insurance agents who can provide personal assistance as well as enrollment advisors. Regional social services offices can also inform you about your options. Coveredca.gov has directories to help you find any of these resources.
Open registration ends on January 31st. After that, you will no longer be able to get insurance through Coverage California unless you lose coverage from your employer, get married, move, or experience some other significant change in your circumstances.
Do I have to have insurance? In California, every member of your household must be insured for at least nine months of the year. If you remain uninsured, you will face a penalty of at least $850 for an adult and $425 for a dependent child under 18; the amount is higher for households with higher incomes. The state enacted the mandate after the federal government lifted its penalty for noncompliance, arguing that it would incentivize younger, healthier people to sign up for coverage. It also provides exemptions from the mandate for several different groups, including Californians who don’t make enough money to pay income taxes, whose premiums would be classified as unaffordable, or who are members of federally recognized American Indian tribes.
What if I’m not a US citizen? Under the ACA, only US citizens and legal residents can purchase subsidized coverage through the state marketplaces. However, according to Covered California, if your child is a citizen and you are not, you can apply for subsidized coverage for your child without affecting your immigration status or your ability to obtain permanent residency or citizenship.
What information do I need to provide to apply?
- Social Security numbers for applicants who are US citizens or proof of legal residency for non-citizen applicants.
- Details of income and employment of each family member.
- Information from your federal tax forms, including the names of the persons listed as your head of household and required dependents.
- Information on employer-provided health insurance available to all family members.
What if I already have a policy through Covered California? In that case, Covered California will automatically renew your policy if you don’t take action, provided your insurer still offers it. But this is a risky choice if your household size, income or address has changed, which could change the amount of subsidy you should receive. By federal law, once you start receiving benefits, you are required to report such changes within 30 days (or within 10 days if you are in Medi-Cal). If your subsidies are not adjusted and you receive too much aid, you may have to pay the difference in taxes next year.
Are premiums higher this year?
Covered California’s Altman said premiums for 2023 are on average 5.6% higher nationwide than this year, a larger increase than in the recent past. This is in line with the national trend of higher increases; according to the Kaiser Family Foundation, the average nationally benchmarked premium increase is about 4%.
“The last few years have not been normal years” because of the pandemic, Altman said; ironically, people sought less care from their doctors, causing premiums to remain stable or even decline. Even taking into account the expected increase in the next year, according to her, insurance premiums have increased by only 2.3% on average over the last four years.
That’s well below the national average, Altman said, thanks in part to Covered California’s negotiations for better rates and aggressive marketing to state residents, which helped attract a large and relatively healthy group of enrollees. But she added: “The health care system is not immune to the cost increases that are occurring in wider society.”
ACA subsidies increase when premiums rise, so the vast majority of California’s covered customers won’t feel the pain of health cost inflation. But keep in mind that these subsidy increases in the Inflation Reduction Act will expire in three years unless Congress renews them.
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