NCPA - National Center for Policy Analysis

Ambiguity in Health Law Could Make Family Coverage Too Costly for Many

August 14, 2012

Under rules proposed by the Internal Revenue Service (IRS), some working-class families would be unable to afford family coverage offered by their employers, and yet they would not qualify for subsidies provided by the Affordable Care Act (ACA), says the New York Times.

The fight revolves around how to define "affordable" under provisions of the law that are ambiguous. The definition could have huge practical consequences, affecting who gets help from the government in buying health insurance.

  • 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 IRS says this calculation should be based solely on the cost of individual coverage for the employee, what the worker would pay for "self-only coverage."

Critics say the administration should also take account of the costs of covering a spouse and children because family coverage typically costs much more.

  • In 2011, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,430 a year for single coverage and $15,070 for family coverage.
  • The employee's share of the premium averaged $920 for individual coverage and more than four times as much -- $4,130 -- for family coverage.
  • Under the IRS proposal, such costs would be deemed 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 IRS issued final rules for the health insurance premium tax credit in May, but deferred its final decision on the affordability of family coverage.

Source: Robert Pear, "Ambiguity in Health Law Could Make Family Coverage Too Costly for Many," New York Times, August 11, 2012.


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