Missed Open Enrollment? Not yet

Open enrollment for individual policies is not over. If you apply before Jan. 15, your effective date of coverage will be Feb. 1, 2019. Historically, Covered California has extended the last deadline, but as of this writing we have no formal notice of an extension. The process seems to have stabilized and there may be concern from insurance companies that they are being set up for adverse selection.

Adverse selection means that the insurance company is at an underwriting disadvantage. In other words, more sick individuals enroll than healthy ones. The ACA has a provision that requires all citizens to have some form of health insurance or face a financial penalty. This was done to create the largest pool in which to spread the risk.

The concept of insurance is simple: risk sharing. Healthy people’s premiums pay premiums pay for the sick people. I am reminded of a healthy client who wanted to drop their health insurance, but decided against it. Not long after, one family member had an accident that cost $1 million for treatment.

Beginning in 2019, there will be no tax penalty for an individual who does not have health insurance. Without this mandate, it is expected that more healthy people will choose not to have insurance, thus making the pool smaller.

Short-term limited duration insurance plans will be banned in California beginning January 1, 2019. So, this will not be an option if you miss open enrollment.

The Federal Poverty Levels have been updated for 2019. This increases the income one can claim in order to qualify for subsidies. We have had several clients pleasantly surprised by the fact that their net premium has actually decreased due to this change.

The maximum taxable income that a single person may claim and still qualify for a subsidy is $48,560. A couple may claim up to $65,840 and a family of four may claim up to $100,400. I have couples in their 60’s paying only $2 monthly for high deductible health plans as a result of these subsidies.

It is important to understand that if one is offered “affordable coverage” by their employer, they are then disqualified from the subsidies for themselves and their family.

The federal website at healthcare.gov defines “affordable” as follows:

A job-based health plan covering only the employee that costs 9.56% or less of the employee’s household income. If a job-based plan is “affordable,” and meets the “minimum value” standard, you’re not eligible for a premium tax credit if you buy a Marketplace insurance plan instead.

  • The plan used to define affordability is the lowest priced “self-only” plan the employer offers — meaning a plan covering only the employee, not dependents. This is true even if you’re enrolled in a plan that costs more or covers dependents.
  • The cost is the amount the employee would pay for the insurance, not the plan’s total premium.
  • The employee’s total household income is used. Total household income includes income from everybody in the household who’s required to file a tax return.

Income is counted for you, your spouse, and everyone you’ll claim as a tax dependent on your federal tax return (if the dependents are required to file). Include their income even if they don’t need health coverage.

While the individual mandate has been removed, employers with 50 or more employees continue to be required to offer “affordable” coverage to their employees or the firm risks paying a penalty.

Although not required to offer coverage, many of our local smaller employers continue to offer benefits to their employees. They understand that benefits are a valuable way to recruit and retain employees, particularly as the job market tightens.

The majority of small employers will pay a substantial portion of the cost for the employee coverage, but not contribute toward dependent premiums. This may end up disqualifying the employees from subsidies on the exchange for dependents.

To my knowledge, there is no mandatory reporting for employers with under 50 employees that will flag the IRS that an individual was offered qualifying coverage from the employer. When applying for coverage on the Exchange, the applicant must answer questions about offers of other coverage. At the end they attest to the information “under penalty of perjury”. So, if they lie and get caught there are potential ramifications.

If you wish to apply for subsidized coverage, contact Covered CA at 800-300-1506 or go to www.coveredca.com. Be cautious about clicking on “sponsored” websites that take you to a vendor instead of the official site. If you wish to apply for non-subsidized coverage, contact an agent or the companies directly. Anthem Blue Cross and Blue Shield of CA are the only companies offering individual coverage in the Northstate.

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She is the founder of Affiliated Benefit Services where businesses and individuals are assisted in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed.