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Making Coverage Affordable for Families

As my colleague January Angeles has explained, the three draft regulations related to the Affordable Care Act that HHS and the Treasury Department issued last week will help people apply for coverage more easily.  Unfortunately, one provision of the proposed Treasury rule could, if left standing, leave many people uninsured, undermining a core goal of health reform.

Under the Affordable Care Act (ACA), people who are eligible for Medicaid or employer-sponsored insurance generally can’t qualify for tax credits to help them buy private coverage in the new insurance exchanges.  But there’s an exception:  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.

The problem is that Treasury’s preliminary interpretation of the ACA 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.

On average, employer-sponsored health plans charge employees more than twice as much for family coverage than individual coverage.  Under the proposed rule, many workers wouldn’t qualify for help buying coverage for their family even though the cost of family coverage that their employers offered far exceeded the ACA’s 9.5 percent affordability threshold.  Many family members would remain uninsured as a result.

A better reading of the ACA would 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, even though coverage just for the employee costs less, the other family members should be able to get a tax credit to help them buy coverage in the exchange.  This approach would advance health reform’s goal of providing coverage for people who are uninsured because of a lack of affordable options.

Providing premium credits to families in this situation would no doubt cost more than allowing them to remain uninsured.  But the increase would likely be far less than some recent claims.  Over the next two months, we will make our case to Treasury on why it is so important that spouses and children who can’t afford to buy employer-based coverage can take advantage of the ACA’s new coverage option.