The Affordable Care Act requires states to set up their own on-line marketplace to sell health insurance, or have one set up by the federal government. California chose to set up its own marketplace called Covered California. There are two components to Covered California—the Individual Exchange and the SHOP Exchange (Small Business Health Options Program). Although the exact same health plans sold inside the exchange are also available outside the exchange, the exchange is the only place where individuals may receive tax credits and cost sharing subsidies, and where small groups may receive a tax credit.
Individuals applying for coverage in the exchange may qualify for federal tax credits and cost-sharing subsidies. Tax credits and subsidies are available for individuals and families who meet certain income requirements and who do not have affordable* coverage through their employer or a government program. Eligibility is based on a sliding scale determined by family income and size. Individuals and families who make between 138 percent and 400 percent of the federal poverty level – an individual earning up to $46,680 and a family of four earning up to $95,400 – may be eligible.
Federal tax credits may be used when you enroll to lower the cost of your monthly premium. Tax credits are paid by Covered California directly to your health plan.
Cost-sharing subsidies reduce the amount of health care expenses an individual or family must pay at the time they access care. You may be eligible for subsidies if your income in 2015 will be less than $29,175 for an individual and less than $59,625 for a family of four.
The SHOP exchange is available to small groups with 50 or fewer full-time employees. Business owners select the tier of coverage (platinum, gold, silver or bronze) and employees choose which carrier they want from within that tier. Covered California collects the premium from the group and distributes it to the appropriate carrier(s). Even if a group’s employees choose different carriers, the group only needs to make one monthly premium payment to Covered California. The SHOP exchange will be open to employers with 100 or fewer full-time employees effective January 1, 2016.
Small businesses enrolling in the SHOP exchange may qualify for a tax credit if they have 25 or fewer full-time equivalent employees who are paid an average annual salary of less than $50,000. To qualify for tax credits, the employer must contribute at least 50 percent toward the employee’s premium cost. Employers with 10 or fewer full-time equivalent employees paying an annual wage of $25,000 or less qualify for the maximum credit.
To find out if you qualify for a tax credit or cost-sharing subsidy, or to learn more about the state exchange, call us today at (916)467-4647.
* An individual that is offered affordable coverage from his/her employer is NOT eligible for a tax credit or subsidy in the exchange and neither are his/her dependents. Employer coverage is considered affordable if the plan covers at least 60% of healthcare expenses AND if what the employer charges the employee for “employee only” coverage does not exceed 9.5% of the employee’s income.