If you obtain your health insurance through an employer-sponsored plan, you're among a shrinking majority of Americans who enjoy such coverage. More and more businesses are choosing to curtail or eliminate their health insurance plans in the face of rising costs and increasingly complex regulatory frameworks. Although the recent passage of the Affordable Care Act ensures that most Americans will have access to health insurance coverage in the years to come, it's not yet clear where millions of folks will obtain this coverage. It looks all but certain that single-coverage and "a la carte" family plans will be central to the health insurance mix.
Another recent insurance-related development concerns the way in which policyholders are asked to shoulder their premium costs. In order to tamp down on the ruinous financial effects of health insurance inflation, many employers are assessing employee insurance-plan contributions on an income-based sliding scale. In the past, many employers simply charged each of their employees for health insurance on the same flat scale. Executives and cubicle-dwellers alike both paid the same amount of money for identical types of coverage. In fact, many executives' compensation packages included "gold-plated" health insurance plans that were supported by the premium contributions of rank-and-file workers.
Since the passage of the Affordable Care Act in 2009, this practice is increasingly rare. The reason for this abrupt change is simple: The new law sets an "affordability" threshold for employer-sponsored health insurance plans. According to the new threshold, an employee's direct premium contribution for a given plan should not exceed 9.5 percent of his or her gross income. Although employers are free to ask their employees to contribute more than this amount, employees are not obligated to agree.
Under the provisions of the law, "over-contributing" employees become eligible for a certain type of tax credit after reaching the 9.5 percent threshold. This tax credit is designed to offset the cost of obtaining single-coverage health insurance plans on the open market. Workers who earn less than 400 percent of the federal poverty wage are eligible for this credit. As it becomes more widely publicized, many thousands of individuals are expected to begin to take advantage of it.
In order to increase the buying power of their group health insurance plans, many employers are expected to begin charging their employees for health insurance on income-based sliding scales. After all, the practice makes sense from a financial, legal and ethical standpoint.