Thursday, July 21, 2011

Oops: Yet Another Obamacare Glitch “May Leave Families with High Insurance Costs”

The Hill reports this afternoon on yet another “glitch” found in the 2,700 page Obamacare statute.  The issue involves the “firewall” designed to encourage employers to continue offering coverage.  Under the law, individuals can obtain subsidized coverage if their employer plan is “unaffordable,” meaning it costs more than 9.5% of their income.  But Congressional scorekeepers, when analyzing the bill before it passed last year, “took the law to mean that employers and their families aren’t eligible for subsidies as long as the individual plan is affordable – regardless of the price of the family plan.”  In other words, a family plan could cost 20% of a worker’s income – yet that employee and his family would NOT be eligible for insurance subsidies, so long as the plan covering the worker himself cost no more than 9.5% of the worker’s income.

Liberal advocates have noted the dilemma that this provision, coupled with Obamacare’s unprecedented individual mandate, creates:

If you’ve got employer-based coverage that’s affordable for the employee only…the family is expected to take the employer coverage even if it’s totally unaffordable and no one in the family is eligible for the exchange subsidies….If they don’t fix this – and by they I mean either the administration or Congress – we’re going to have middle-class families extremely unhappy with health reform in 2014, because they’ll basically be facing financial penalties for not buying coverage when they don’t have access to any affordable options.

There are two options this technical “glitch” creates.  Under one scenario, individuals will be FORCED to buy employer-provided health coverage even though “they don’t have access to any affordable options.”  Alternatively, the confusion regarding this provision could lead businesses to drop their coverage altogether – in which case ALL their employees would be eligible for taxpayer-funded subsidies, without going through the convoluted “firewall” tests outlined above.  That however would obviously raise the costs of Obamacare’s insurance subsidies, potentially by trillions of dollars.

Last March, Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Now that yet another “glitch” in Obamacare has become known, we find that families will be forced – under pain of financial penalties – to buy coverage they cannot afford.