NCPA - National Center for Policy Analysis

Another Unintended Consequence of Health Reform

July 1, 2011

Older adults of the same age and income with similar medical histories would pay sharply different amounts for private health insurance due to what appears to be an unintended consequence of the new health care law, reports the Associated Press.

  • The glitch mainly affects older adults who are too young for a Medicare card but have reached age 62, when people can qualify for early retirement from Social Security.
  • As the health care law is now written, those who take early retirement would get a significant break on health insurance premiums.
  • That's because part or all of their Social Security benefits would not count as income in figuring out whether they can get federal subsidies to help pay for coverage until they become eligible for Medicare at 65.

To see how the Social Security wrinkle would work, consider a hypothetical example of two neighbors on the same block.

  • They are both 62 and have the same income of $39,500 a year.
  • But one gets all his income from working, while the other gets $20,000 from part-time work and $19,500 from Social Security.
  • Neither of them gets health insurance on the job; they purchase it individually.
  • Starting in 2014, they would get their coverage through a new online health insurance market called an exchange.
  • The neighbor who is getting Social Security would pay an estimated $206 a month in premiums.
  • Half of his income from Social Security, or $9,750, would not be counted in figuring his federal health insurance tax credit.
  • But the neighbor who makes all his income from work would not be able to deduct any of it; he would pay $313 for health insurance, or about 50 percent more.

Source: Ricardo Alonso-Zaldivar, "Fuzzy Math in Health Law Formula," Associated Press, June 30, 2011.


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