Health Insurance Conundrum
July 28, 2021 7:48 AM   Subscribe

Spouse's employer has to start offering health insurance. However, doing so will f**K things up for us and our Marketplace plan. Things get much more detailed inside...

So, my wife's employer has discovered that their little home health business now has the requisite number of full-time employees to require them to offer health insurance. In fact, they crossed that number a few months ago, and they have to offer insurance asap. Which brings us to our problem...

My wife and I (me 63, her 64) currently have a joint Marketplace plan and enjoy substantial financial assistance to make it relatively affordable. My wife, due to a cancer diagnosis and subsequent treatment, maxed-out her deductible for the year early in the year. Starting this February, when she turns 65, she will transition to Medicare coverage. As for me, I will have to rely on the Marketplace for another two years or so.

When my wife's office offers health insurance, she must accept the insurance or stay on our Marketplace plan. However, if she stays on the Marketplace plan, we will no longer qualify for financial assistance and will have to foot the full cost of the coverage, which will be well into four figures, which we will not be able to afford, even for the few months left before she goes on Medicare. Most importantly, going on her employer's insurance would void her paid-up deductible on our Marketplace plan, and starting over on a new, much higher, deductible, just as a string of follow-up tests will hit.

Here's the question...
Would it be legal for her employer to convert her to a 1099 contractor, just for the rest of the year until she starts Medicare, so that we can keep our affordable Marketplace insurance and her valuable paid-up deductible? And, then, hire her back-on as a salaried employee when she goes on Medicare?

This seems like the best, most obvious solution, but the ins-n-outs of medical insurance are so labyrinthine as to make us all think the solution can't be so easy as that. Or, is it?

Yes, I know YANML. But, you might actually be someone who knows the system quite well and, hopefully, give us some helpful guidance on this conundrum.

posted by Thorzdad to Work & Money (15 answers total) 1 user marked this as a favorite
It depends on your state employment laws and what her job is, but probably not, especially if they rehire her as a traditional employee a year later. California, for example, does not allow 1099 positions for workers who's tasks are essential to the core business activity. Its more complex than that, but you get the idea.

What you're talking about would be considered illegal misclassification of an employee at best, or insurance fraud at worst, neither of which her company is likely to be enthusiastic about participating in.

A non-illegal option would be for her to drop her hours to below full-time (this also varies by state) so she no longer qualifies for health insurance through her work, and go back to full time work after she turns 65.
posted by ananci at 8:02 AM on July 28, 2021 [5 favorites]

You need to talk to a CPA or a marketplace plan consultant that is familiar with the marketplace plans as well as the health insurance that can calculate the best plan forward for you. You need serious number crunching that we can't help you with by remote.

Keep in mind that being self-employed (1099) vastly increases the paperwork she has the file (quarterly instead of yearly) for self-employment. Also, misclassifying an employee has potentially severe penalties for the employer. It's not something they can just "hand-wave", esp. if they are now more compliance-conscious.

Also keep in mind that the age 65 qualification simply means Medicare Part A becomes free. It may be a good time to estimate the premium you need to pay to join Medicare a little "early" and whether the coverage after joining the necessary parts to parallel the marketplace plan would be worth it, if it is just for a year or two.

And I agree with the "go below full-time" advice. That would disqualify her from employer insurance.
posted by kschang at 8:07 AM on July 28, 2021

Response by poster: A non-illegal option would be for her to drop her hours to below full-time (this also varies by state) so she no longer qualifies for health insurance through her work, and go back to full time work after she turns 65.

Would this option work even if her duties, work-load, and pay remain the same? I mean, there's no realistic way her duties could be done part-time, and we definitely couldn't absorb any pay cut. She's salaried now, if that matters in the equation.
posted by Thorzdad at 8:14 AM on July 28, 2021

These are just things to consider and discuss with someone local:

Even if the employer has to offer ASAP there’s still a period (90 days?) where you can’t be considered eligible for employer insurance. If that’s accurate, does that get you close enough to Medicare?

Can the job only offer insurance that doesn’t meet the affordability/minimum value standards required to end your assistance payments, at least temporarily?

Agree you don’t want to get into trying to cheat with 1099 classification. I don’t even think the employer could risk bumping her hourly pay and making her a 25-29 hour/week part-time employee, though perhaps they could if the hours really were restricted (I saw your note saying the job duties wouldn’t allow that.)
posted by michaelh at 8:23 AM on July 28, 2021

I think you're pretty stuck, unfortunately; given that you're in your 60s, the Marketplace premium is likely to be too high to make sense even with the deductible already met. But maybe not -- you should run numbers.

Is there any way you can get at least some of the tests and visits done before the Marketplace coverage will end? And see if medications can be filled early and/or for a 90-day or longer supply. Sometimes the magic words to get insurance authorization are "I'm planning to travel outside the country for an extended period...".

It really might be worth it to see if you can cut hours. I believe that full-time is considered to be 30+ hours for purposes of determining ACA full-time status. Is there any way you can work with the employer to have 10 hours per week taken off her caseload, at least for the next few months until she's able to get through all these tests/follow-up visits? That's an income hit -- but you'll be paying less net when the lower medical costs are factored it, it sounds like. And then you could go back up to full-time in November or whatever, try to get everything filled for another 90 days and then her Medicare coverage kicks in in February. That is what I would try to do in your shoes.

Also keep in mind that the age 65 qualification simply means Medicare Part A becomes free. It may be a good time to estimate the premium you need to pay to join Medicare a little "early" and whether the coverage after joining the necessary parts to parallel the marketplace plan would be worth it, if it is just for a year or two.

This is not possible. You can enroll early in Social Security (at 62), but you are not ordinarily eligible for Medicare until you turn 65 (except if disabled or for end stage renal disease).

Also, looking further ahead you should probably try to talk to a SHIP (state health insurance assistance program) counselor to work on Medicare options. This is a free service and unlike brokers, they aren't able to charge or to steer you to particular plans. Google SHIP + [your state] to find them -- usually this program is administered by your state's Department of Aging or similar.

Medicare is pretty great once you get everything set up but there are some complexities in understanding how the system works as it's a bit more confusing than simply "here are your two employer-offered choices" -- there's the different Parts for hospital, medical and drug plans, and there's also the option to take Medigap supplemental coverage, which is basically a way to reduce deductibles and/or other copays or out-of-pocket costs with a second plan, and that may be worth it depending on your wife's anticipated or possible ongoing costs.
posted by tivalasvegas at 8:59 AM on July 28, 2021 [1 favorite]

Home Health jobs aren't that hard to come by and there are many healthcare temp agencies that don't offer insurance. It might be best for her to look for another job that doesn't offer insurance and then ask to come back once the medicare coverage kicks in if they truely are the better employer.
posted by AlexiaSky at 9:29 AM on July 28, 2021

Response by poster: Home Health jobs aren't that hard to come by and there are many healthcare temp agencies that don't offer insurance. It might be best for her to look for another job that doesn't offer insurance and then ask to come back once the medicare coverage kicks in if they truely are the better employer.

She's not a caregiver. She's more-or-less the second in command salaried executive.
posted by Thorzdad at 9:41 AM on July 28, 2021

I'm chiming in to say that I'm watching this closely - Herr Duck and I are on a marketplace plan but he is in the process of interviewing for a temporary but excellent job that - as far as we know - has insurance attached to it. We are healthcare users and have already paid our deductible on our marketplace plan. If he is offered the job and HAS to take the insurance, he will have to decline the job or our medical costs will be more than what he would make. It sucks. We're trying to figure out what we can do. If we come up with any ideas, I'll let you know.
posted by Gray Duck at 9:50 AM on July 28, 2021

I am not an expert. I think you should find an expert to advise you on this. Two things come to mind. One, and again, I am not an expert, is that if you switch insurance for certain reasons during the plan year and if you have already met your deductible, I think that carries over. I think the new plan has to honor that assuming the deductible is at or below the old one. If it is higher, then you would still be obligated for the difference. Two, look closely at your marketplace plan, but you may be able to finish the year on it without change to cost.

I could be talking out of my ass here, but I do so to emphasize the poiint that there are experts in this field and it is very worth talking with them. I would also try to get someone on the phone from both insurance plans and ask all these types of questions.
posted by AugustWest at 10:25 AM on July 28, 2021

Argh, I gave bad info. Turns out the "monthly premium" are for people who didn't work 40 quarters. You STILL have to be age 65. The only early way to get medicare before age 65 is to have ALS or EHRD (renal failure) and thus receive Social Security Disability benefits.

Basically, there's no way to get on Medicare early, and you can't get subsidy if your employer offers health benefits, which makes the marketplace plan out of reach. But you also said you can't reduce hours so you no longer get health benefits.

So your only two paths are:

a) keep the marketplace plan for the low deductibles... by losing all the subsidies, which is obviously a non-starter.

b) forget the deductible in the marketplace plan and just go on the employer plan.

Sounds like the latter is the only viable solution going forward. I don't think there's a better solution for this. However, here are a couple more "minutiae" to look into

1) Deductible transfer credit -- I don't think this applies to you, but it wouldn't hurt to ask. Basically if employer switches insurance from company A or B, and partial deductible was met with company A, then the insured gets a certain amount of deductible credit with company B. As marketplace plans are usually considered individual plans, I am not sure you can get credit from individual plan to company plan (or vice versa, very different insured pool) but again, would not hurt to ask a "navigator" for the marketplace.

2) Look for shrinking deductible
posted by kschang at 10:28 AM on July 28, 2021

The 1099 thing likely doesn't work unless her job duties drastically change such that it's functionally no longer the same job. She would not be able to keep the same duties and workload, and stay salaried, while suddenly being considered a contractor. Nothing to do with how medical insurance works, it's just about the distinction between employees and contractors. Here's a quick and dirty rundown of some of the differences.

I suspect this is a no-go for you, and you need to find an expert on insurance and the Marketplace to help you consider any options you may have overlooked.
posted by Stacey at 10:47 AM on July 28, 2021

I am neither a lawyer nor an HR professional. I imagine there are likely anti-discrimination laws (among other things) that might preclude this and so you would definitely want to consult both those types of experts, but could you ask spouse's employer to just not offer her the new health insurance? Maybe by removing health coverage in exchange for higher salaries for upper-level executives, for instance? The employer mandate triggers penalties when an employer doesn't offer minimum essential coverage to at least 95% of full-time employees -- if the company is big enough to fall under the mandate, then not including health coverage in one employee's benefit package won't cause the company to fall below that 95% threshold.
posted by bassooner at 11:13 AM on July 28, 2021 [1 favorite]

Is it possible that you can both transition to the new plan provided by her employer? It looks like as long as she continues working after age 65 at that employer then you can both stay on her plan and she can just delay moving to Medicare (note: I think you still have to enroll within a certain time period of turning 65, but you can still keep other coverage). If she's critical to the company, maybe the company can provide some financial help to help offset the new deductible you'll be facing.
posted by victoriab at 12:18 PM on July 28, 2021

Employers cannot pick and choose what employees to offer health insurance to. Due to anti-discrimination laws, if they are required to provide health insurance, it must be offered to everyone. Source: I work for an insurance brokerage.
posted by ananci at 5:36 PM on July 28, 2021 [1 favorite]

Until recently I was a professional health insurance expert specializing in group (employer) insurance, but I am not a licensed broker and I am not equipped to provide you with specific advice about your situation. That said, some things you should know:

These days you can usually carry over your deductible, even to a new carrier. It can require some effort on your part, like getting a letter from the previous carrier to send to the new one, and then waiting awhile. But it's definitely more common than not now. (You cannot, however, carry over credit earned toward your out-of-pocket max).

To answer your main question: It is not legal for an employer to deliberately mis-classify an employee as a 1099 contractor. This is an IRS thing, not a health insurance thing, and the company can be fined for it pretty severely. Larger corporations often do this and accept the fine if they get caught, but a 50-employee small business probably can't absorb the cost.

To address other things that have come up:

It is not possible for an employer to choose not to offer health insurance to a full-time employee who would otherwise be eligible. Like ananci says above, this violates non-discrimination regulations. The most likely consequence of this if they get caught is that the employer can no longer offer health insurance to employees on a tax-free basis, and they could even have the whole plan cancelled for the whole company.

It is very risky (for the employer) to change an employee's work status, or falsify the number of hours they work (calling them part-time if they're working and being paid for full-time hours) for the purpose of manipulating their insurance eligibility. This could also be seen as violating the non-discrimination clause, and is likely a violation of their contract with the health insurance carrier.

Things I have seen people in similar situations do:

Employers can cover 100% of employee premiums. Small businesses often can't afford to do this for everyone, but there is a bit of a grey area where they are allowed to do it for a class (subset) of employees if they follow certain rules. A company who wants to do this should consult their health insurance broker, ideally before the new policy is set up.

Employers can increase an employee's taxable salary to cover additional costs.

Employers can set up an ICHRA, which is a Health Reimbursement Arrangement they can have alongside a health insurance plan, where the company contributes tax-free dollars to employees to cover medical costs besides the health insurance premium.

This all sucks, I'm sorry you're having to navigate it. Please do consider talking to a Marketplace advocate who might be able to talk you through how things would work regarding deductible transfer, and when they'd stop offering subsidies.
posted by rhiannonstone at 8:22 PM on July 28, 2021 [2 favorites]

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