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Effective: June 1, 2009 |
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15.05.20.10ar4 - Determining Employer-Subsidized Insurance (ESI) Cash Benefits (Archive) |
Archived: June 1, 2010 |
Employer-subsidized insurance (ESI) is coverage offered to employees for which an employer or union pays at least 50% of the cost of coverage.
Some employers offer cash benefits to employees for the purchase of health insurance rather than offering a choice of specific health plans that the employer purchases under contract. Employees may use the benefit toward the purchase of a health insurance plan of their choice.
Because the cost of plans varies widely, the employer-provided cash benefit may be more or less than 50% of the cost of the coverage selected.
There are three types of employer's cash contributions for health care coverage:
l Lower wages with coverage or higher wages without coverage.
l Cash contribution designated for purchase of other health insurance. Employer does not offer a plan.
l Employer contribution under self-insured or self-funded plans.
For all other types of employer health care coverage, see Determining ESI.
Cash Contribution for Coverage.
Self-Insured or Self-Funded Plan.
Some employers offer employees a choice of:
l A higher salary with no health care coverage.
l A lower salary with health care coverage.
When the employer offers the choice in compensation with no changes in work hours, flex time, scheduling or job title, determine if the health care coverage is ESI following the steps in Determining ESI. If the result is:
l ESI, the client is considered to have access to ESI even if the client chooses the higher salary with no coverage and is not eligible for MinnesotaCare.
l Not ESI, the client may choose whether to enroll in or maintain coverage.
When the employer offers a choice of compensation but the choice also dictates such things as the work schedule, number of work hours, flex time, and job title, the client does not have access to ESI.
Example:
Angie’s employer offers her the choice of two compensation plans.
Under the first plan, employees' pay is $8 per hour. They can choose the employer’s insurance plan at a cost of $195 per month. The employer will not contribute to the cost of the insurance.
Under the second plan, employees' pay is $7.05 per hour. They must contribute $25 each month for the employer’s insurance plan, and the employer will pay $170 per month (more than half).
Angie chooses the first plan, but does not purchase the insurance.
Action:
Angie is not eligible for MinnesotaCare because she has access to ESI.
Example:
Katie’s new employer offers her a choice of:
l Working the day shift 40 hours a week, at $8 per hour with health care coverage.
l Working the night shift 30 hours a week, at $16 per hour without health care coverage.
Katie chooses the night shift. She applies for MinnesotaCare.
Action:
Katie does not have access to health care coverage or ESI because the health care coverage offer includes an option in pay and work hours.
Cash Contribution for Coverage
Some employers offer cash benefits to employees to buy their own health insurance policies rather than offering a choice of specific health plans that the employer purchases under contract.
Employees may use the cash benefit toward the purchase of health insurance plans of their choice. Because the cost of plans varies, the employer's cash contribution may be more or less than 50% of the cost of the coverage selected.
To determine if the employee and dependents have access to ESI, use the full cost of MinnesotaCare coverage for the family size to determine the proportion of the employer contribution. Follow these steps:
1. Determine the current full cost of coverage, which is the maximum premium amount, using the MinnesotaCare Premium Table (DHS-4139) based on household size.
Note: Do not use the actual premium based on income.
2. Determine the amount of cash the employer is contributing.
3. Determine the percentage the employer pays of the coverage.
l If the employer share (Step 2) is 50% or more of the total premium amount (Step 1), the insurance is ESI.
l If the employer share (Step 2) is less than half of the total premium amount (Step 1), the insurance is not ESI.
Note: Count the cash contribution as earned income.
Example:
Bob applies for MinnesotaCare for himself, his wife, and their two minor children. His employer contributes $100 per month toward the cost of health insurance for the family. The full cost of MinnesotaCare coverage for a family of four is $1,233.
Action:
Determine if the cash payment is ESI.
1. The full coverage cost for MinnesotaCare is $1,233.
2. Bob’s employer pays $100.
3. The employer's cash benefit is less than 50% of the cost of coverage.
Bob and his dependents do not have ESI. Count the $100 as earned income.
Example:
Carl's employer will reimburse him for health insurance premiums up to $500 a month. Carl is applying for MinnesotaCare. His wife, Ella, is on MA. The household size is two. Carl is the only one requesting MinnesotaCare. The full coverage cost for MinnesotaCare is $822 for a household of two.
Action:
Determine if the cash payment is ESI.
1. The full coverage cost for MinnesotaCare is $822.
2. The employer pays $500.
3. The employer’s cash benefit is 50% or more of the cost of coverage.
Carl has access to ESI.
Example:
Jim, his wife Portia, and their mutual child apply for MinnesotaCare. Jim's employer pays him $350 each month to purchase health insurance for his family.
Use the maximum premium amount from the MinnesotaCare Premium Table for a household of three.
Action:
Determine if the cash payment is ESI.
1. The full cost of MinnesotaCare for a household size of three is $1,233.
2. The employer contributes $350.
3. The employer’s contribution is less than 50% of the cost of coverage.
The family does not have access to ESI.
Example:
Melba's employer offers cash to buy health insurance. Melba's husband is on Medicare and is not eligible for MinnesotaCare. They have three children. The MinnesotaCare cost is $1,233 for a household of five. The employer contributes $1,000.
Action:
Determine if the cash payment is ESI.
1. The full cost of MinnesotaCare for a household of five is $1,233.
2. The employer contributes $1,000.
3. The employer’s contribution is 50% or more of the cost of coverage.
The family has access to ESI.
Self-Insured or Self-Funded Plan
The employer contribution under self-insured or self-funded plans may vary depending on what services the client uses.
To determine whether these plans qualify as ESI follow these steps:
1. Obtain the full cost of the premium for the employee, spouse, and dependents the employer would charge the employee under COBRA.
Note: If the employer is unable to provide the COBRA amount, use the full cost of MinnesotaCare coverage for the household size using the MinnesotaCare Premium Table (DHS-4139).
2. Determine the amount of the employee contribution.
3. Determine the percentage of the employee contribution toward the coverage the COBRA amount.
l The plan is not ESI if the employee contribution (Step 2) is more than 50% of the cost of COBRA (Step 1).
l The plan is ESI if the employee contribution (Step 2) is equal to or less than 50% of the COBRA amount.
Example:
David's employer offers health coverage through a self-insured plan. David pays $30 per month for his coverage and $150 per month for his wife and son.
The employer's contribution varies depending on claims submitted. The employer reports that the full cost of coverage for employees eligible for COBRA benefits is $100 per month for the employee and $300 per month for dependents.
Action:
Determine if the plan is ESI.
1. The total COBRA cost is $400 ($100 for employee + $300 for dependents).
2. The employee contribution is $180 ($30 for David + $150 for dependents).
3. The employee contribution is less than 50% of the cost of COBRA.
David and his family have access to ESI.