A Glitch in Health Care Reform

Confusing language in the health care reform law has raised the possibility that millions of Americans living on modest incomes may be unable to afford their employers’ family policies and yet fail to qualify for government subsidies to buy their own insurance. This is a bizarre development that undercuts the basic goal of health care reform — to expand the number of insured people and make their coverage affordable.

The people left in the lurch would be those who had lower incomes but were not poor enough to qualify for Medicaid. They would either have to pay more than they could afford for an employer’s family plan or go without health insurance. The problem arises because the reform law quite properly tries to keep people from dropping affordable employment-based coverage and turning to taxpayer-subsidized coverage on new insurance exchanges, starting in 2014. Only those with coverage deemed “unaffordable” by the health care act would be allowed to receive subsidies. 

As Robert Pear reported in The Times recently, the law considers a worker’s share of the insurance premium unaffordable when it exceeds 9.5 percent of the worker’s household income. But that calculation is based on individual coverage for the worker alone, not family coverage, which is much more expensive. That is how the wording of the law has been interpreted by the Internal Revenue Service and the Congressional Joint Committee on Taxation. 

Analysts at the Kaiser Family Foundation, a nonpartisan research organization, estimated that in 2008, 3.9 million nonworking dependents were in families in which the worker could afford individual coverage (costing less than 9.5 percent of household income) but not the family plan, which cost, on average, 14 percent of household income. 

In the most recent Kaiser survey, in 2011, the worker’s share of the premium for individual coverage averaged $920 a year, meaning that any family making $9,700 or more would be deemed to have affordable insurance. But the share for a family policy cost workers an average of $4,130 a year, far more than what most low-income families can pay. 

A separate analysis by the Urban Institute, using different estimation techniques, found that more than two million people could be adversely affected. Either way, the number of people at risk is large. Worse yet, if government programs that now cover millions of low-income children are scaled back in coming years, this glitch could also deprive them of an alternative way of getting health insurance.   

Fixing the glitch will require reconciling the needs of low-income families with other provisions in the law that complicate the issue. The law imposes penalties on employers if their workers have to resort to seeking subsidies because their job-based coverage is too expensive. 

Several analysts have suggested a solution that would allow workers’ dependents to buy subsidized coverage, without penalizing the employers. The worker would simply remain covered through the employer, while the rest of the family could get subsidies to buy separate coverage on the exchanges. 

The Treasury Department ought to interpret the law to allow such a compromise. It appears to have little or no opposition. Otherwise Congress would have to amend the law. But that seems unlikely at a time when House Republicans are determined to do everything possible to disrupt the health care reform law. Doing nothing would leave vulnerable families out in the cold. 

source