Q. My wife and I are retired, and we’re both under 65. We have health insurance through my previous employer’s retiree-only plan. In 2014, the premium for our coverage will double, to 13.3 percent of our income. But since coverage for me alone would “only” cost 6.7 percent of our income, we won’t qualify for subsidies on the exchange. Is there any way that one or both of us can opt out of my retiree-only plan and get subsidized insurance on the exchange?
A. The short answer is yes, you can opt out of your retiree-only plan and shop for subsidized coverage on the health insurance marketplace.
In general, people who have employer-sponsored insurance that meets the definition of “minimum essential coverage” are eligible for exchange subsidies only if the employer plan is considered unaffordable or inadequate under the health law. It’s inadequate if it pays for less than 60 percent of covered medical expenses, and it’s unaffordable if the premium for self-only coverage costs more than 9.5 percent of family income. That affordability standard is where many people run into trouble: As long as coverage for one person doesn’t exceed 9.5 percent of family income, the plan is considered affordable, even if the premium for family coverage exceeds that threshold. Since the plan is affordable, employer-insured workers generally can’t qualify for subsidies on the marketplace.
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However, the law treats people with retiree coverage differently than those in the workforce with job-based insurance, says Timothy Jost, a law professor at Washington and Lee University and an expert on the health law.
“If you are a retiree and you’re eligible for retiree coverage but elect not to receive it, you do not have minimum essential coverage and therefore would be able to get through the firewall and apply for premium tax credits,” says Jost.
In other words, if you opt out of your retiree plan to choose a policy on the health marketplace instead, you may qualify for premium tax credits that are available to people with incomes between 100 and 400 percent of the federal poverty level ($15,510 to $62,040 for a couple in 2013).
Keep in mind, however, that even though the premiums may be more affordable on the exchange, it’s important to carefully compare the benefits in your retiree plan with those in the exchange plans to make sure a new policy provides the coverage you need.
