Millions of Families Ineligible for Obamacare Subsidies Because of IRS Ruling

[JPZenger]

http://www.nytimes.com/2013/01/31/us/politics/irs-to-base-insurance-affordability-on-single-coverage.html?_r=0

http://www.nytimes.com/2013/02/03/opinion/sunday/a-cruel-blow-to-american-families.html

These articles are from earlier this year, but the problem has not been fixed. It is known as the "Family Glitch." Of course, the US House has no interest in trying to fix any of these glitches.

For millions of families, an employer provides coverage for the employee and then the employee pays most or all of the costs of insuring their spouse and/or kids. Obamacare starts out saying that an employee who is offered health insurance at work for the employee and the employee's family is not eligible to buy insurance from the health care exchanges (which offer large federal subsidies to middle income families). For that rule, it doesn't matter whether or not the employer pays any of the insurance costs for the spouse and kids.

There is an exception - if the employee pays more than 9.5% of their income for health insurance under the employer's plan, then the family can choose to buy subsidized insurance through the exchange. Many middle income families who currently pay high insurance costs could ON PAPER be eligible for federal subsidies averaging about 1/2 to 2/3rds of the cost of their insurance.

HOWEVER, the IRS issued a ruling earlier this year that said that the 9.5% of income rule is only based upon what the employee has to pay out of pocket for their existing employee coverage and NOT what the employee has to pay out of pocket for insurance coverage of their whole family. Therefore, millions of middle income families think they will be eligible for a subsidy, but when they try to use it, they will find out they are completely on their own and out of luck.

For example, if a family has a $50,000 income, the employee would have to be paying out of pocket at least $4,750 for their own employee coverage. If not, that employee would not receive any federal subsidy for insuring the employee's spouse and kids, which could easily exceed another $15,000 out of pocket.

[JPZenger]

1. More on this issue

http://thehill.com/blogs/floor-action/senate/290537-wyden-healthcare-laws-family-glitch-leaves-dependents-without-coverage

Excerpt:

"Sen. Ron Wyden (D-Ore.) said Tuesday that millions of workers’ dependents would still be left without options for affordable family health insurance under the Affordable Care Act.

“Without action, millions of hard working Americans are going to be squeezed by the family glitch,” Wyden said. “Many people will be left with a false choice of taking family coverage through work they can’t afford or struggling to find a better plan in the exchange without a subsidy.”

Wyden said that there is a “family glitch” because workers will be ineligible for federal tax credits to help them buy into the health insurance exchanges starting in 2014, unless the cost of their individual employer-based health coverage premium exceeds 9.5 percent of a worker’s household income. Wyden said that glitch ignores the fact that family coverage is much more expensive than individual coverage, and could leave some middle-class workers in a tough spot."

[mike_c]

2. it's the insurance company profit mandate....

eom

[Puzzledtraveller]

9. ^^this^^

rude awakening coming soon

[Barack_America]

11. These families are exempted from the mandate.

Which shows that the government understands middle class families can't pay 30% of their income for health insurance....just doesn't care enough to increase the cost of the ACA in order to extend subsidies to them.

[Bluenorthwest]

15. Support that assertion. Exempted? That makes no sense at all.

It sounds wrong.

[Barack_America]

19. Here (link)

http://www.advisory.com/Daily-Briefing/2013/06/27/Who-will-be-exempt-from-the-ACA-mandate-The-final-list

I'll direct your attention to the "final rule" hardship exemption (still learning how to cut and paste on my iPad)

I wrote an OP about this a couple of months ago.

http://www.democraticunderground.com/10022964238

[JPZenger]

22. Much More on these issues

Thanks for the link. It says:

"The final rule also includes a hardship exemption for dependents of a worker who has been offered affordable individual coverage but cannot afford the cost of family coverage. Observers have noted that the affordability of family coverage is a technical problem in the ACA, because the law defines "affordable" individual coverage—plans that costs less than 9.5% of a household's income—but does not delineate affordable family coverage."

-------

A number of small companies will consider dropping their employee coverage completely if they find that their employees can get better coverage on the exchanges with federal subsidies. This is because it is almost impossible to receive any subsidy for a family plan if the employee receives coverage from their employer.

Small businesses are supposed to have additional opportunities to buy insurance on the exchanges, but they still won't be eligible for any subsidies from the exchange.

There are supposed to be some tax credits of "up to 50%" for small businesses to pay health insurance, but if you read the fine print, only the very smallest businesses with the lowest income employees would receive much of a credit. Others will be lucky to receive a 2% credit.

The penalties are so low that they will have little impact on decision-making.

----
This law also limited the ability to shield income from taxes to pay out of pocket health care costs to only $2500 a year. (This is through Flexible Spending Accounts). With increasing deductibles and co-pays, $2,500 doesn't go far.
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They also have reduced the ability of families to deduct medical expenses on their federal income taxes starting in the 2013 tax year.

From AARP "In 2010, you can only deduct medical expenses that exceed 10 percent of your adjusted gross income (up from 7.5 percent in 2012). However, if you are 65 or older, the threshold stays at 7.5 percent. Beginning in 2017, everyone will be subject to the 10 percent limit."

http://www.irs.gov/Individuals/Questions-and-Answers:-2013-Changes-to-the-Itemized-Deduction-for-Medical-Expenses

[pnwmom]

3. Under normal circumstances, Congress would work together to fix these inevitable glitches,

but the Rethugs see it in their interest to make this as unworkable as possible, no matter how many families suffer.

[alc]

5. they won't fix something they didn't want in the first place. is anyone surprised?

The biggest problem with ACA is that it optimistically depends on lots of people acting for the common good even when it goes against their self interests.

* repubs are needed to fix real issues in the legislation (and associated regulations)

* insurers are expected to accept the 20% MLR and be happy with the additional consumers. For year-on-year growth (after all additional customers have signed up) insurers are expected to not raise medical costs which is the only way to raise profit.

* young people are expected to buy insurance even when it goes against their financial self-interest (catastrophic coverage would have been ideal for them)

* CEOs are expected to continue hiring full time employees and providing benefits for families even when the tax/penalty is significantly less.

* regulators are expected to hold a firm line on premium raises even when insurers have a lot of ammunition to make regulations look bad in a PR blitz.

* republican-led states will implement exchanges even though they don't want the ACA

With everyone cooperating, the ACA could be better than what we had. It was overly optimistic (putting it nicely) to expect something as big as the ACA to work as planned with so much cooperation required and no leverage to force cooperation or any built up good will to encourage/facilitate cooperation. It's pretty hard to pin it on republicans, especially since they were warning about a lot of the things that are happening now at the time while democrats were blowing off those warnings.

At this point I blame both parties. Republicans aren't helping. I don't expect them to, but there will be families suffering and that's not acceptable behavior on the Rs part. But I don't see Democrats trying to fix things either. At this point "fixing things" means giving concessions to the other side since Ds don't control congress. These problems were created by the Ds pushing something through with a lot of problems and they need to do what they can to keep the legislation from making families suffer.

[pnwmom]

6. Why should you blame Dems for Rethugs intransigence? If the Dems hadn't pushed this through

we'd have nothing.

Instead, we have a large expansion of Medicaid (for people who live in blue and purple states); millions of young people covered by their parents' policies; guarantees that you can't be denied coverage or charged extra for preexisting conditions or kicked off insurance if you get sick; and the end of annual or lifetime limits.

Any important bill will have glitches that must be ironed out. But the Rethugs decided when Obama was first elected that their single primary goal was to keep him from being successful. Don't blame the Dems for that.

[Bluenorthwest]

16. How about the endless years of preaching bipartisan love for the GOP

Coburn says he would like to impeach Obama, who spent years telling everyone how close he and Coburn and their wives are, how they share their faith and enjoy each other's company and what a good honest man Coburn is. He wrote in Time magazine that Oklahoma is lucky to have Coburn.
So this deal of having leadership praising the GOP has been a problem. The people oppose them and Obama says 'oh now now we should be nice to them, they are my brothers in Christ!'
He likes the other side more than he likes liberal gay people, and it costs him.

[Puzzledtraveller]

10. Bingo!

[Scuba]

4. Medicare for All. eom

[Hydra]

7. Yet another hole in what was already a bad idea

Should be interesting to see what survives this. Probably all of the corp giveaways, if I had to place a bet.

[JPZenger]

8. All of health insurerers are getting their clients to do early renewals to avoid the law

There are so many uncertainties that all of the health insurers in the US are going to their clients and convincing them to sign early year-long renewals of their existing policies. As a result, the requirements of the law would not apply to those policies for another year. A few states have outlawed the practice.

[Barack_America]

12. Not a hole, a deliberate move to reduce the cost of the ACA...

...to appease Republicans.

Another example of the middle class getting fucked in this country, and another landmark in the increasing divide between the haves and have nots.

[Holly_Hobby]

13. What about early retirees who pay for their health care

through his former employer and are too young for Medicare? My husband retired at 57 due to a disability. We pay $1,268/month for healthcare for both of us for the plan offered by his former employer. We sure would like to take advantage of the program. Do you know if there is someone I can call? I don't have access to health care insurance for myself through an employer. Thanks.

[JPZenger]

17. There will be organizations that will help people sign up through the exchanges

I don't know enough to answer your question. However, there are local non-profit organizations that are being contracted to help people through the process. The policies on the exchanges are designed to be easily compared to each other - as gold, silver, bronze quality.

[Nye Bevan]

18. May I ask what state you are in?

I have been following the ACA quite closely (as my wife has a pre-existing condition so is hard to insure) and it is quite possible that some helpful information on what kind of premium you will pay has already been released. I am pretty sure you will enjoy considerable savings.

[Holly_Hobby]

24. Thanks - We're in Ohio n/t

[Egalitarian Thug]

14. If only we had been warned...

I wish, oh how I wish, that someone had tried to talk about his kind of thing back in '09.

[Niceguy1]

20. they should have had time

To look at ut before passing the bill.

Too many surprises.

[JPZenger]

21. Tons of Mis-information and Lack of Information

I tried to do some research on these subjects, and it is amazing how hard it is to find answers.

First, the official US govt. site says almost nothing. It links to you a Kaiser site that makes it appear that people will be eligible for large federal subsidies, without addressing the fine print that makes those subsidies impossible to obtain. There are tons of partisan sites that blindly attack the whole process.

Then, there are sites run by insurance brokers that tell everyone to stick with the coverage they have and renew your policies early, because there are too many uncertainties and because premium costs are likely to rise severely if you wait.

Meanwhile, the details on available plans are supposed to be posted by October 1, but some agencies are warning that the system will be vulnerable to identity theft. People who want to use those exchanges will have a window between Oct. 1 and Dec. 15th to make a decision.

[ConcernedCanuk]

23. USA gots the most powerful war machine on the planet

.
.
.

Keep your damm war-machine,

We got universal health care.

I'm staying here.

CC