Focus on Subsidies may Shortchange Employer Plan Benefits

It seems that everyone is focused on the availability of subsidies in the exchange plans. We get many questions about whether and how employees can qualify for a subsidy. The general answer is that if an employee has an offer of coverage from their employer and it meets the affordability and coverage requirements – they can’t waive the employer plan and qualify for a subsidy.

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But, it’s important to remember – and remind – employees who have employer based plans available to them that an employer plan is also a subsidized plan. And, the subsidy through the employer plan – as well as the scope of coverage provided by the employer – may be of much greater value.

 Employer contributions to an employee’s coverage (and, if applicable, their family members) are tax free benefits. The subsidy, so to speak, is that the employee doesn’t pay taxes on the employer’s contribution to coverage!

 Most employers also deduct any employee contributions to premiums on a pre-tax basis. There’s another subsidy masquerading as a pre-tax contribution.

 An individual purchasing coverage in the health exchange may qualify for a subsidy to help pay premiums. But, the premiums that the individual pays are paid on an after-tax basis.

 And, I would be remiss in mentioning that employer-based coverage generally means that an employer – or the broker on the case – will assist with explaining the plan of benefits as well as help with any problems that may arise with claims.