(The NY Times editorial says "The ideal solution would be for Congress to clarify that the 9.5 percent calculation is based on a family plan, and that dependents can get subsidies on the exchanges if there is no affordable coverage at work." No, the solution is Medicare For All. -- Scott McLarty, Green Party Media Coordinator)
Federal Rule Limits Aid to Families Who Can’t Afford Employers’ Health Coverage
By ROBERT PEAR
The New York Times
WASHINGTON — The Obama administration adopted a strict definition of affordable health insurance on Wednesday that will deny federal financial assistance to millions of Americans with modest incomes who cannot afford family coverage offered by employers.
In deciding whether an employer’s health plan is affordable, the Internal Revenue Service said it would look at the cost of coverage only for an individual employee, not for a family. Family coverage might be prohibitively expensive, but federal subsidies would not be available to help buy insurance for children in the family.
The policy decision came in a final regulation interpreting ambiguous language in the 2010 health care law.
Under the law, most Americans will be required to have health insurance starting next year. Low- and middle-income people can get tax credits to help them pay premiums, unless they have access to affordable coverage from an employer.
The law specifies that employer-sponsored insurance is not affordable if a worker’s share of the premium is more than 9.5 percent of the worker’s household income. The I.R.S. said this calculation should be based solely on the cost of individual coverage, what the worker would pay for “self-only coverage.”
“This is bad news for kids,” said Jocelyn A. Guyer, an executive director of the Center for Children and Families at Georgetown University. “We can see kids falling through the cracks. They will lack access to affordable employer-based family coverage and still be locked out of tax credits to help them buy coverage for their kids in the marketplaces, or exchanges, being established in every state.”
In 2012, according to an annual survey by the Kaiser Family Foundation, total premiums for employer-sponsored health insurance averaged $5,615 a year for single coverage and $15,745 for family coverage. The employee’s share of the premium averaged $951 for individual coverage and more than four times as much, $4,316, for family coverage.
Under the I.R.S. rule, such costs would be considered affordable for a family making $35,000 a year, even though the family would have to spend 12 percent of its income for full coverage under the employer’s plan.
The tax agency proposed this approach in August 2011 and made no change in the definition of “affordable coverage” despite protests from advocates for children and low-income people and many employers. Employers did not want to be required to pay for coverage of employees’ dependents. But they said that family members should have access to subsidies so they could buy insurance on their own.
However, that would have increased costs to the government, which would have been required to spend more on subsidies.
Paul W. Dennett, senior vice president of the American Benefits Council, which represents many Fortune 500 companies, said: “Individuals who do not have affordable family coverage should be eligible for premium tax credits in the exchange. The final rule does not provide that.”
Under the law, people who go without insurance will generally be subject to tax penalties. In a separate proposed regulation issued on Wednesday, the Internal Revenue Service said that the uninsured children and spouse of an employee would be exempt from the penalties if the cost of coverage for the entire family under an employer’s plan was more than 8 percent of household income.
Bruce Lesley, the president of First Focus, a child advocacy group, said: “The administration recognizes that the cost of family coverage will be unaffordable for many families. They will not have to pay the penalty. But that will not be much of a consolation to families who cannot get health insurance for their kids.”
The 2010 health care law extended Medicaid to many childless adults and others who were previously ineligible. The Supreme Court said the expansion of Medicaid was an option for states, not a requirement as Congress had intended.
Kathleen Sebelius, the secretary of health and human services, said Wednesday that she wanted to use her discretion to prevent the imposition of tax penalties on certain uninsured low-income people in states that choose not to expand Medicaid.
A rule proposed by her department would guarantee an exemption from the penalties for anyone found ineligible for Medicaid solely because of a state’s decision not to expand the program. The administration said this was “an appropriate use of the hardship exemption.”
About 20 states are expected to expand Medicaid; governors in other states are opposed or uncommitted. Many illegal immigrants, prisoners and members of certain religious groups opposed to the acceptance of insurance benefits will also be exempt from penalties if they forgo coverage, the administration said.
The Congressional Budget Office predicts that 30 million people will be uninsured in 2016 and that 6 million of them will pay penalties.
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EDITORIAL
A Cruel Blow to American Families
The New York Times
The Internal Revenue Service has issued a hugely disappointing ruling on how to calculate the affordability of health insurance offered by employers. Its needlessly strict interpretation of the Affordable Care Act could leave millions of Americans with modest incomes unable to afford family coverage under their employers’ health insurance but ineligible for subsidies to buy coverage elsewhere.
The problem arises from murky language in the law. It says a worker cannot get taxpayer-subsidized coverage on the new health insurance exchanges, starting in 2014, unless the cost of employer-based health coverage for that worker exceeds 9.5 percent of the worker’s household income.
Both the I.R.S. and the Congressional Joint Committee on Taxation have interpreted the law to consider only the cost of covering the individual employee in calculating the 9.5 percent, not the much higher cost for a family plan.
Although some analysts had offered persuasive legal and social arguments for adopting a more expansive and generous interpretation of what the law requires, the strict interpretation prevailed in a final rule issued by the I.R.S. last week.
There is no doubt that this pinched approach will put a significant number of workers and their dependents in a bind. A Kaiser Family Foundation survey found that in 2012, employees’ annual share of insurance premiums averaged $951 for individual coverage and $4,316 for family coverage. Under the I.R.S. rule, such costs would be considered affordable for an employee with a household income of $35,000 a year — making the employee’s spouse and children ineligible for a public subsidy on a health exchange, even though that family would have to spend 12 percent of its income for the employer’s family plan.
Estimates made in 2011 by respected research organizations suggested that some 2 million to 3.9 million non-working spouses and dependents would be harmed by the strict ruling. Looking only at children who were uninsured but supposed to gain coverage under health care reform, the Government Accountability Office estimated last June that 460,000 might remain uninsured because of the affordability definition, and that 1.9 million might stay uninsured if an existing children’s health insurance program is phased out as currently planned. This outcome is exactly the opposite of what health care reform is supposed to achieve.
It is hard to see what might be done to reverse this deplorable result. The ideal solution would be for Congress to clarify that the 9.5 percent calculation is based on a family plan, and that dependents can get subsidies on the exchanges if there is no affordable coverage at work. But House Republicans, who are bent on obstructing the health reform law, would never agree to helpful changes, especially one that would increase federal spending.
This problem increases the need to retain the children’s health insurance program, which is financed only through 2015. And it will be crucial to assess the impact that this misguided provision has on coverage, access to care, and the financial burdens on families of modest means.
