The Health Insurance Donut Hole 3.0 : HEALTH REFORM WATCH

Professor John Jacobi has informed us well regarding the donut hole to be created for the uninsured who would have been eligible for Medicaid under the ACA expansion of Medicaid in states that choose not to sign on to expanded Medicaid, but apparently there?s another level of donut hole awaiting low- and middle-income Americans potentially ineligible for tax credits and government subsidies for procurement of health insurance. This donut hole revolves around the definition of ?affordable,? and Robert Pear in The New York Times does a more than able job of explaining it under the meaning of the word as promulgated by the I.R.S.:

Under the law, most Americans will be required to have health insurance starting in 2014. Low- and middle-income people can get tax credits and other subsidies to help pay their premiums, unless they have access to affordable coverage from an employer.

The law specifies that employer-sponsored insurance is not affordable if a worker?s share of the premium is more than 9.5 percent of the worker?s household income. The I.R.S. says this calculation should be based solely on the cost of individual coverage for the employee, what the worker would pay for ?self-only coverage.?

Critics say the administration should also take account of the costs of covering a spouse and children because family coverage typically costs much more.

In 2011, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,430 a year for single coverage and $15,070 for family coverage. The employee?s share of the premium averaged $920 for individual coverage and more than four times as much, $4,130, for family coverage.

Under the I.R.S. proposal, such costs would be deemed affordable for a family making $35,000 a year, even though the family would have to spend 12 percent of its income for full coverage under the employer?s plan.

Which means, of course, that although health insurance could be deemed ?affordable? for an employee? thus making that employee ineligible for tax credits and subsidies? his or her family coverage could amount to a very large portion of income, but still remain ineligible for tax credits and subsidies. I would suggest that it is these kinds of financial dilemmas in cash strapped families that have led so many to eschew health insurance in the past.

Perhaps just as interesting though is that the determination is based on ?household income.? In families with children in which one parent works full time and the other works part time, it is not hard to envision a scenario in which the supplemental income of the part time earner serves to increase the household income just enough to make the cost of health insurance for the individual full time employee less than 9.5% of household income?creating a classic disincentive to work among families in dire need of income.

Photo by Muu-karhu

Source: http://www.healthreformwatch.com/2012/08/12/the-health-insurancedonut-hole-30/

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