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August 13, 2014

By: Dr. Leah Curtin

The Affordable Care Act isn’t affordable for many

Now that the Affordable Care Act (ACA) is being implemented nationwide, many people have affordable health coverage. Millions of people have health insurance through an employer or a loved-one’s employer but don’t like it or can’t afford it. The ACA allows you to drop that coverage and shop for plans on your own, either through a state or federal exchange or on the private insurance market. The federal government offers sliding-scale tax credits to individuals and families who earn between 138% and 400% percent of the federal poverty level ($19,790 for a family of three for 2014).

If you already have job-based insurance, you have to pass a second test to qualify for tax credits—your employer’s insurance also needs to be considered unaffordable. Because the law’s definition of what’s unaffordable is complicated, let’s look at only this one measure: Employer-based insurance is considered unaffordable when the employee’s individual premium is more than 9.5% of annual household income. Please note that the word “individual” is italicized. This is important. It means that if premium costs for the employee alone are less than 9.5 % of household income, that employee and his or her family members are NOT eligible for tax credits even if the cost of family coverage exceeds 9.5% of household income. Even if adding family members to the plan consumes 15% of more of a worker’s income, his family is not eligible for tax credits. That’s the glitch, and it affects hundreds of thousands—maybe millions—of people.

Although employers must offer “affordable” insurance to their employees, it is often outrageously expensive to add spouses, children, and other dependents to the plans. As a result, their most “affordable” option may be to purchase a different health plan for each member of the family—and even then, the premiums may consume 25% of the worker’s income. It doesn’t matter. They don’t qualify for tax credits.

The president–and Congress–need to fix this glitch. Otherwise the Affordable Care Act will not be affordable for many.

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