By January of next year, Obamacare will require Americans to have insurance coverage, either through their employer or through one of the health law’s statewide insurance marketplaces. In order to make that coverage affordable, the law provides progressive insurance subsidies in the form of tax credits for Americans buying coverage on the marketplaces and fines companies that don’t cover their workers. But an existing loophole in the law may leave some American families in a coverage gap — and Congress may not be able to agree on a solution to fix the glitch.
The families in question would be unable to afford family health plan premiums through their employer, while also ineligible to qualify for the subsidies to help them buy an alternative plan on an Obamacare exchange. As Modern Healthcare explains, the loophole has to do with the definition of what is considered “affordable” coverage under the law, which is directly related to the federal subsidies that a family is eligible to receive:
Congress said affordable coverage can’t cost more than 9.5 percent of family income. People with coverage the law considers affordable cannot get subsidies to go into the new insurance markets. The purpose of that restriction was to prevent a stampede away from employer coverage.
Congress went on to say that what counts as affordable is keyed to the cost of self-only coverage offered to an individual worker, not his or her family. A typical workplace plan costs about $5,600 for an individual worker. But the cost of family coverage is nearly three times higher, about $15,700, according to the Kaiser Family Foundation.
So if the employer isn’t willing to chip in for family premiums — as most big companies already do — some families will be out of luck. They may not be able to afford the full premium on their own, and they’d be locked out of the subsidies in the health care overhaul law.
Ron Pollack, the executive director of the health care advocacy group Families USA, told Modern Healthcare, “This is a very significant problem, and we have urged that it be fixed. It is clear that the only way this can be fixed is through legislation and not the regulatory process.”
Unfortunately, that doesn’t bode well for the American families who fall inside of this coverage gap. While Obama Administration officials have called for a fix, the GOP-controlled House of Representatives has been staunch in its refusal to do anything with Obamacare other than obstruct its funding sources. Some Republicans have gone even further than that, attempting to strip away the law’s federal insurance subsidies to Americans in states that choose not to implement their own exchanges, claiming that a semantic technicality in Obamacare forbids assisting Americans in such states from buying coverage — a move that the Administration has vehemently rejected, since it would financially devastate Americans in half of the country.
The IRS has instituted certain regulations in an attempt to mollify the impact of the loophole on American families, ruling that families that fall into that coverage hole will not be subject to the law’s penalty for not purchasing insurance. All in all, very few Americans will actually be subject to the individual insurance mandate penalty, and 80 percent of those who will have incomes higher than the federal poverty level. Still, that may end up being small comfort for the Americans whose employers choose not to pitch in for family health plans.