ACA Update – Opt-Out Payments

As you know, under the ACA employees who have access to ‘affordable’ health insurance from their employer are not eligible for subsidies, and large employers (50+ FTEs) must offer affordable coverage.  This year (2016), affordable means that the employee’s portion of individual health insurance premiums is less than 9.66% of their household income; in 2017 that number rises to 9.69% of income.  What you might not know is that opt-out payments can affect the affordability calculation.  Conditional opt-out payments – you only provide opt-out payments to employees who are not enrolled in your plan but are enrolled in another plan that satisfies the minimum coverage requirements of the ACA – do not affect affordability.  Unconditional opt-out payments – you provide opt-out payments to any eligible employee who decides not to enroll in your plan – DO affect affordability.

Here’s an Example

Employees who enroll in your health insurance must pay $50/month in premium for individual coverage.  However, you offer an unconditional opt-out of $150/month to eligible employees who decide not to enroll in your coverage.

As a result, your employees who enroll in your health insurance are deemed to pay $200/month for the purposes of the affordability calculation.  In this case a full-time employee’s annual pay will need to be at least $24,845 in order for coverage to qualify as affordable.  If you don’t offer the opt-out pay (or it is conditional), your full-time employee only needs to make $6211 a year for coverage to be affordable.

As always, please let me know if you have any questions regarding the Affordable Care Act or employee benefits.

Elizabeth Ingram
Account Manager, Employee Benefits
CU Insurance Solutions
Phone: 800-287-3379 x 312



Broker World, July 2016.  Janet Letourneau’s ‘Affordability Determination, Government Entities, And Benefits Administered By The VA And HSAs