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A huge pocketbook item

January 16, 2013 - Jim Anderson
Next year, 2014, is when Obamacare tax credits are supposed to kick in to make sure that health insurance is “affordable” for American families.

However, a proposed interpretation of the law from the Internal Revenue Service appears to only ensure that health insurance is affordable for individual employees — not their spouses and dependents.

At right is a Remapping Debate piece by Mike Alberti that summarizes the implications of the IRS ruling.

Increasingly, employees are being asked to pay a greater share of insurance premium costs.

Let’s say your family insurance policy costs $13,000 a year and your employer pays half that cost — leaving you to pay $6,500 per year.

Your spouse works at a job that offers no insurance and your total family income is $50,000.

The Affordable Care Act sets the threshold for insurance “affordability” at 9.5 percent of household income. If you’re paying more than that, supposedly you’re eligible for a tax credit. In the example above, you’re paying 13 percent of your household income and, it would seem, are due some assistance.

Under the IRS ruling, however, that’s not the case. That’s because the 9.5 percent threshold is being applied simply to self-only coverage.

In other words, if your employer offers self-only coverage with your share of the premium at, say, $3,000 per year, you’re not eligible for assistance because $3,000 is just 6 percent of your household income.

Even though, in reality, you’re paying 13 percent of your household income for family health insurance.

As detailed in the link at right, there are scenarios where families could be paying 20 percent of their household income in insurance premiums, and yet be eligible for no assistance.

“I don’t know of many families that would call 20 percent of their income an ‘affordable’ amount to pay for health insurance,” says JoAnn Volk of the Georgetown University Health Policy Institute.

The IRS interpretation and other factors in insurance affordability are not yet settled. The Administration has yet to say whether an employer’s failure to offer workers the opportunity to get affordable insurance for their family members means that those family members will be eligible for subsidies to buy individual insurance through an insurance exchange, Alberti notes.

With insurance premium costs continually on the rise, this a huge pocketbook item for American families.

And yet, Alberti writes, “Several officials in the Obama Administration did not respond to requests for comment on the consequences of its proposed rule.”



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