Health Coverage Must Be Affordable for Families, Too

Many people who are uninsured because they can’t afford health coverage for their family would remain uninsured under the Treasury Department’s current interpretation of one piece of health reform (i.e., the Affordable Care Act or ACA).  The Government Accountability Office (GAO), which estimates that some 460,000 children could be affected by this interpretation, recommends that Treasury and the IRS adopt an alternative approach that reflects health reform’s goal of expanding coverage.  We strongly agree.

Here’s the issue:

Under the ACA, people with incomes up to 400 percent of the poverty line can qualify for tax credits to help them buy private coverage in the new insurance exchanges, as long as they’re not eligible for Medicaid or employer-sponsored insurance.  People whose employers offer coverage can still qualify for the tax credits if their employer coverage isn’t affordable; the ACA considers employer coverage unaffordable if it costs more than 9.5 percent of a family’s income.

Here’s the problem:

Treasury’s current interpretation of the ACA — as reflected in a proposed rule — considers employer coverage affordable for the entire family as long as coverage just for the employee costs no more than 9.5 percent of the family’s income.  Unfortunately, on average, employer-sponsored health plans charge employees more than twice as much for family coverage as individual coverage.  Thus, many workers wouldn’t qualify for help buying coverage for their family even though the cost of employer-provided family coverage far exceeded the ACA’s 9.5 percent affordability threshold.  Many family members would remain uninsured as a result.

GAO looked only at the potential impact on children.  It found that 6.6 percent of the nation’s uninsured children, or roughly 460,000, live in families that wouldn’t qualify for help buying coverage — even though their incomes are low enough to qualify — because they had access to employer-sponsored insurance that the proposed rule considered affordable.  These children aren’t eligible for coverage through Medicaid or the Children’s Health Insurance Program (CHIP), either.

To implement health reform, Treasury should consider the affordability of coverage for an employee’s family as a whole.  If family coverage costs more than 9.5 percent of the family’s income, the other family members should be able to get a tax credit to help them buy coverage in the exchange.

That would advance health reform’s goal of providing coverage for people who are uninsured because they lack affordable options.