Obamacare, insurance and your choices: Options for Californians who don’t like their work-based coverage

Q: If my husband’s employer offers health care insurance but it is unaffordable, where does that leave us? Will we qualify for help under Obamacare or will we be out in the cold? We make about $45,000 annually.

A: Apparently, lots of you dislike the health insurance options offered by your employers.

Carrie from the Sacramento suburbs submitted this question, but I’ve received a crush of similar queries from all over the state.

Your most common complaint? The coverage is too expensive. The runner-up: The plans your employers offer don’t cover certain benefits, doctors or hospitals.

Given the intense interest in this topic, I plan to devote several columns to your options under Obamacare.

After all, work is where most of us get our health insurance (if we have it). Though the rate has dropped over time, 53 percent of Californians received their coverage through an employer (or the employer of a family member) in 2010-2011.

Starting in January, when the major provisions of the Affordable Care Act take effect, you’ll be free to ditch your employer’s coverage and shop for plans on your own, either through a new state-run insurance marketplace called Covered California or on the open insurance market.

Whether you will be eligible for tax credits to offset your premiums is a whole other matter.

Covered California will offer 13 health plans across the state (not all in each region) that cover a standard set of benefits. Individuals and families who earn between 138 percent and 400 percent of the federal poverty level will be eligible for sliding-scale tax credits.

(UPDATE: Covered California ended up offering 11 health plans in 2014.)

This year, 400 percent equals $45,960 for an individual or $94,200 for a family of four. (Click here for federal poverty level guidelines.)

Do you clear the income hurdle? Don’t get too excited yet, because even if you fall within that income range, you’re not automatically eligible for the tax credits through Covered California.

Instead, you qualify for the credits if your employer’s insurance is considered “unaffordable.” That happens when:

  • The employee’s share of the insurance premium to cover him- or herself only is more than 9.5 percent of annual household income. If the employer offers multiple plan options, the test applies to the lowest-cost option.           

or

  • Your employer’s insurance covers, on average, less than 60 percent of your medical expenses, leaving you with expenses of 40 percent or more.

The income and affordability tests are two big hurdles. You’d need to clear them both if you want the tax credits. (For more details, check out this Internal Revenue Service Q&A.)

I hate to say this, but there may be a third hurdle for readers like Carrie, who need family or dependent coverage. It’s what Dylan Roby, a health reform expert at UCLA, calls “the kid glitch.” I’ll dive into that hornet’s nest in my next column.

Q: Does it matter if I get my insurance from a small business or large business?

A: No. The same rules apply regardless of business size, or whether the business is governmental, for-profit or non-profit.

Q: I am retired, age 61, live in San Jose and get insurance through my former employer. However, I hate the plan. I would like to purchase insurance once the exchange opens up. Will I be allowed to do so? From what I can tell it will be a little more expensive but it offers far better coverage.

A: Yes, Jeri, the same rules apply to both current employee and retiree plans, Roby says.

To summarize, you can buy on the exchange, but whether you have to pay full freight depends on the same factors I outlined above: Your income and whether your former employer’s insurance meets the affordability test.

Learn more about Emily here.

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