|ObamaCare’s “Family Glitch” Hurts the Middle Class|
By Ashton Ellis
Wednesday, April 10 2013
“…no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what. My view is that health care reform should be guided by a simple principle: fix what’s broken and build on what works.” — President Barack Obama, address to the annual meeting of the American Medical Association, June 2009
President Obama’s words have served as a baseline guarantee in public commentary about what passed into law as the Patient Protection and Affordable Care Act of 2010, the comprehensive health reform measure also known as ObamaCare.
According to the President’s sales pitch about fixing what’s broken and building on what works, ObamaCare could only improve the system. What’s more, he promised, if you don’t like the improvements you will be able to keep the doctors and health insurance plans you already have, making his version of reform sound like a win-win proposition.
But now fast forward to January 29, 2013. On that day, the Internal Revenue Service released its interpretation of a series of interlocking requirements under ObamaCare.
The biggest loser: middle-class families. They turn out to be the cohort that will be too expensive for employers to cover under ObamaCare’s costly requirements that raise the price of health insurance. Unfortunately, even full-time breadwinners will also be unable to qualify for federal subsidies to pay for private plans to cover their dependents.
Supporters of ObamaCare call it a “glitch.” In reality, it’s the logical outcome of a law that was never debated and considered properly.
Here’s how it happened.
By now, most Americans are familiar with ObamaCare’s individual mandate requiring every citizen to have health insurance or pay a fine. What many may not know is that the law intends that millions of workers will meet the requirement by getting insurance through their employers.
For simplicity’s sake, let’s call this the employer mandate.
Under the law, businesses operating with more than fifty full-time employees must provide each worker with an affordable health insurance option. Affordable means the employee’s share of the premium does not exceed 9.5 percent of the employee’s household income.
If the employer fails to offer health insurance under that threshold, the employer gets fined. The employee, however, qualifies for federal subsidies to help pay for private insurance on a state-based health insurance exchange.
In that case, the individual mandate applies, meaning the employee will pay a tax penalty if he fails to buy health insurance. But like an employer who is responsible for covering all its full-time employees, an employee shopping for health insurance is responsible for covering himself, and all his dependents (such as a non-working spouse and children).
But here’s the problem. Because ObamaCare dramatically increases the amount of items that must be covered in even the most basic health insurance plans – including such helpful but expensive ones like mental health and substance abuse services, maternity and newborn care, prescription drugs, rehabilitation, and preventive and wellness management – the cost of health insurance will spike precipitously starting in 2014.
Insurance analysts are already sounding the alarm. Recently, the Society of Actuaries released a report estimating that individual health plan claims costs will increase by 32 percent as early as next year. Some are even speculating that insurance premiums could double in some areas of the country because of ObamaCare’s forced migration onto more expensive plans.
Employers are feeling the squeeze. The average cost of insuring an individual worker is already $5,600, while the average cost for insuring a worker and his family is $15,700, according to the Kaiser Family Foundation. With those costs virtually guaranteed to rise, employers will not be able to offer family insurance plans that cost less than 9.5 percent of an employee’s household income.
For its part, the federal government doesn’t want to see millions of workers and their families claim subsidies for the exchanges because doing so will explode federal spending on an item that ObamaCare’s authors thought would be little used.
What to do when employers want to avoid a fine and the government wants to avoid a subsidy?
If you’re the IRS, you change the law with a stroke of your regulatory pen.
Despite everyone’s assumption, dependents of full-time workers will not be automatically covered under ObamaCare. According to the IRS, employers will not be required to provide an affordable insurance plan that covers an employee’s family.
Instead, any individual plan that is below the 9.5 percent threshold qualifies as affordable. And because the individual plan now qualifies as “affordable” under ObamaCare, the IRS interpretation also disqualifies employees from getting federal subsidies to help cover the cost of insuring their families.
That’s a big blow to middle class workers since even the IRS estimates that a typical insurance plan under ObamaCare for a family of five will cost around $20,000 a year.
But don’t worry. Workers who can’t afford to cover their dependent children on their own won’t run afoul of the individual mandate’s tax penalty. So long as the worker is covered, the IRS won’t levy a fine.
Thus, thanks to a law titled, in part, the “Affordable Care Act,” up to 3.9 million dependents from middle class families will likely lose not just their doctor, but also their health care plan because their full-time breadwinner cannot afford it.
Despite President Obama’s promises, that’s reality when a law that was too important to read and too complex to understand is rushed through Congress on its way to making history.
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