Kentucky is one of the states that have set up a health insurance exchange where qualified individuals will receive subsidies to purchase coverage. The big question is whether this will discourage employers from offering group coverage.
Following the Supreme Court ruling to uphold the Affordable Care Act (ACA), the state of Kentucky has moved ahead to establish its own Health Benefit Exchange. The online Exchange will begin operation on January 1, 2014. Individuals without employer-based coverage will receive generous tax subsidies to buy Kentucky individual health insurance through the Exchange. However, the big question is now is whether these subsidies will discourage employers from offering group coverage.
Significance of the Kentucky Health Benefit Exchange
Why Tax Subsides on Kentucky Individual Health Insurance May Affect Group Coverage
Starting in 2014, individuals who do not have employer-based coverage and have a household income that is less than 400% above the federal poverty line, can get tax subsidies to enroll in a Kentucky health plan through the Exchange. For instance, a family of four with $90,000 projected annual income in 2014 could get a government tax subsidy which covers nearly 50% of the overall health insurance premium. Similarly, a single individual with a projected income in 2014 could get a tax credit that covers 75% of the overall premium.
Experts are saying that these generous tax credits on the individual Kentucky health insurance market will encourage both big and small businesses to give up group coverage. Instead, firms will use the health reimbursement arrangement (HRA) to provide their workers with tax-free allowances to purchase private health insurance. As employers with less than 50 employees are not charged any penalty if their employees are eligible for the federal subsidy, they will be among the first to drop group coverage.
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