One of the stated goals of the Affordable Care Act (ACA), aka ObamaCare, was to loosen the connection between healthcare and employment. People would no longer be trapped in unsuitable jobs just to maintain health insurance – they could purchase their own insurance through the exchanges.
However, you may find that a new job provides better benefits and greater coverage than your existing exchange-based plan. Should you change your healthcare plan to your new employer and ditch your ObamaCare plan?
The obvious answer would be yes, but you need to consider a few issues.
- Assess Coverage vs. Costs In-Depth – Most economic factors favor an employer-based plan. Since employers pay some part of the premiums, the employer plan is likely to be more economical to you – unless you are getting an incredible deal on subsidies, and your new job may throw you into an income level that changes or eliminates those subsidies. Finally, your health insurance premiums paid through employers are with pre-tax dollars whereas individual ObamaCare plans are after-tax, thus reducing your tax bill.
However, it is equally important to assess correctly the differences in coverage. You need to dig into the details of the coverage provided by each plan, especially the exclusions. A plan that appears to be a great deal may be worse for you if it limits the services you are most likely to need.
- Near-Future Changes – If your job has great healthcare benefits now, what are the odds that those benefits will stay that way? The employer mandate begins in 2015 for companies with over 100 full-time equivalent (FTE) employees, and 2016 for companies with over 50 FTEs. The tax on high cost “Cadillac plans” is set to begin in 2018.
Given the chaos of implementation last year, you cannot rule out the possibility of further changes on the fly. Since you can change your coverage on a yearly basis, you only need to verify with your employer the stability of the plan for a limited timeframe – but it is important to stay tuned to potential longer-term changes that make your plan less desirable.
- Timing and Transition – The transition from an ObamaCare plan to an employer-based health plan is a little easier than going in the other direction, but it still requires some timing. To make sure you do not leave yourself uncovered, you need to schedule the ending date of your ObamaCare plan coverage to coincide with the start of your job-based coverage – which may not be your starting employment date.
The transition may also affect your taxes. Any tax credits you receive as part of your ObamaCare plan are based on your projected income for that year. If your new job increases your income, you could be responsible for paying back part of that subsidy on a sliding scale, and you will need to pay back all of it if your Modified Adjusted Gross Income (MAGI) rises to over 400% of the Federal Poverty Level (FPL).
Subsidies are prorated, so if it appears increased salary will force you to pay back a subsidy, it should benefit you to switch from ObamaCare to the employer plan as soon as possible.
Generally, for truly equivalent coverage, an employer plan should cost you less than an exchange plan, but there are exceptions… and that general rule may change in the future. Take the time to check your options in depth and do not hesitate to ask your new employer for assistance in evaluating your choices.