The following post comes from Gary Skeen, president of CBF’s Church Benefits Board, as part of a blog series related to health care changes due to the Affordable Care Act.

Understanding the Individual Healthcare Insurance Marketplace

Let’s talk about the new Health Insurance marketplace for individuals, created for those who don’t have health insurance, or have trouble getting it because of “pre-existing conditions” or other reasons.

In earlier posts (see Part 1 and Part 2), we talked about the biggest requirement for the new Affordable Care Act is that almost everyone will need to have some health insurance for 2014, or face a penalty in the form of a tax.

The Individual Marketplace was created for this reason.

If your church provides health insurance that meets the minimum required coverage parameters and is affordable, you may not find the new individual marketplace to be an advantage.

The Individual Marketplace was designed so individuals or families can purchase health insurance without having to coordinate with an employer (or church). In the past, churches with small staffs, sometimes only one, have found individual policies and paid for them as an employer-provided benefit. The Individual Marketplace is set up to assume premiums are paid for with after-tax contributions and are not tied to employer benefits or reimbursements.

Everyone can participate in the Marketplace, but to be eligible for the Advanced Premium Tax Credit (APTC) and the out-of-pocket expense assistance, you must not be offered medical coverage through your employer that meets minimum value requirements and is considered affordable (based on your income).

Factoring in housing allowance may qualify ministers for tax credits

One key factor for ministers is that the income level for determining eligibility for tax credits and out-of-pocket expenses assistance is based on modified adjusted gross household income, which does not include housing allowance compensation.  As a result, many ministers may qualify for tax credits and possibly out-of-pocket assistance through the new Marketplace.

Employer coverage is considered affordable if the annual premium cost for the individual employee is not higher than 9.5 percent of household income. Because it is based upon adjusted household income, your church may not know if the coverage they offer is considered affordable for you.

The marketplace structure for both the individual marketplace and Small Employer Health Options Plans (SHOP), are offered at four levels: bronze, silver, gold and platinum for comparison purposes.  These metal levels are based on estimates of the out-of-pocket medical cost the average individual will pay. You must compare plans within each medal level to gauge the suitability for your needs and price.

Here’s an example: Pastor John works for Anywhere Baptist Church. His salary is $70,000 and his housing allowance is $20,000. Since his wife doesn’t work, his estimated household income after housing is $50,000.

The church has decided to offer medical coverage for their staff. They offer Pastor John a policy through SHOP or the open market and their selected level of contribution towards the cost of coverage is 20% of the premium cost.

After applying the 20%, his remaining premium is still 17% of his MAGI, over the 9.5% affordability requirement. The income level reduced by the housing allowance benefit allows the pastor to be eligible for the APTC. Even though the church has offered coverage that meets minimum coverage requirement, Pastor John does not have to accept the coverage since it does not meet the affordability requirement.

Online subsidy calculator lets you calculate your numbers

If you would like to experiment with your own figures, The Kaiser Family Foundation has a Subsidy Calculator (http://kff.org/interactive/subsidy-calculator/) that will help provide more examples of what credits/supplements you may be eligible for and how those benefits relate to the different metal level plans offered.

In the example above, at this site Pastor John with his family of four is at 212% of the poverty level.  He could receive a tax credit up to $8,133 and the amount he would have to pay for a silver plan would be $3,365. This calculator gives you an example of what the bronze level would cost, the potential out-of-pocket liability and other coverage options available. Bear in mind these are just examples and real cost won’t be available until October 1, 2013.

On the government website (https://www.healthcare.gov/), you can type in questions on just about anything. You also have the ability to create your account in preparation for October. In the example above, if you ask about out-of-pocket savings, you find out that Pastor John may be eligible since his income is below $58,875 for a family of four.  If you decide to accept out-of-pocket assistance then you must choose a silver level plan.

This new Marketplace will require employers (churches) to take a role in deciding what the employer provides or if the individual is now responsible for obtaining their own coverage.  Some churches and denominations may decide to get out of the medical benefit provider role, however as I mentioned in the last blog, I hope it will be a bigger decision than just monthly cost.

Our next blog post will focus on the SHOP plans that are available through the Marketplace.  This will be a new option available for churches to purchase cost-effective coverage for staff.  If you are following our blogs and have any questions please email us at churchbenefits@churchbenefits.org.