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Healthcare Law Could Leave Families With High Insurance Costs

by Julian Pecquet

A major provision of the healthcare reform law designed to prevent businesses from dropping coverage for their workers could inadvertently leave families without access to subsidized health insurance.

The problem is a huge headache for the Obama administration and congressional Democrats, because it could leave families unable to buy affordable health insurance when the healthcare law requires that everyone be insured starting in 2014.

Some of the administration’s closest allies on healthcare reform warn this situation could dramatically undercut support for the law, which already is unpopular with many voters and contributed to Democrats losing the House in the 2010 midterm elections.

“It’s going to be a massive problem if it comes out that families have to buy really expensive employer-based coverage,” said Jocelyn Guyer, deputy executive director at Georgetown University’s Center for Children and Families.

“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 [healthcare] 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.”

At issue is a so-called “firewall” in the law that denies subsidies to workers whose employers offer quality, affordable coverage.

The firewall applies to plans with premiums that cost less than 9.5 percent of a worker’s income. If a worker has to dole out more than that amount to buy coverage, the employer coverage is considered unaffordable and the worker is eligible for subsidies to buy coverage on the new exchanges.

Initially, advocates thought the threshold also applied to family coverage. If premium costs paid to cover a worker’s family cost 20 percent of a worker’s income, for example, the worker and his or her family should be eligible for subsidies.

But in calculating the bill’s cost last year, Congress’s Joint Committee on Taxation (JCT) 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.

This means the costs to an employee for covering his or her family could be too high to afford for many working families.

“If you’ve got employer-based coverage that’s affordable for the employee only,” Guyer said, “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.”

The glitch is causing heartburn for advocates who worry that it could leave thousands of children and spouses uninsured and subject to penalties for not having insurance.

“The JCT read of the language is disturbing and we hope the administration doesn’t read the language that way,” said Bruce Lesley, president of the children’s advocacy group First Focus. “It would put dependent coverage, children and spouses at grave risk.”

The Obama administration is expected to clarify shortly — through Treasury Department regulations — who’s eligible for subsidies.

An administration official told The Hill, “These matters will be considered in future regulations.”

Healthcare reform proponents say they’ve quietly been talking to the administration for months about the issue.

“We’ve talked to them — a lot — about this,” said Judith Solomon, vice president for health policy at the liberal Center on Budget and Policy Priorities. “We’ve made our views known.”

While advocates say changing the policy is a no-brainer, the costs could be a hurdle.

One new study, by the Employment Policies Institute, estimates that changing the policy could cost taxpayers $50 billion per year. But if the administration leaves the policy as is, “millions of families will be stuck in a no-man’s-land without affordable coverage through their employer or the exchange.”

“Whichever interpretation holds,” the study concludes, “the consequences are significant.”

Others dispute those figures. They argue that employers will offer affordable coverage for whole families and point out that many children who aren’t covered by employer family plans are eligible for Medicaid or the Children’s Health Insurance Program.

“It’s really not clear to me how much of an impact it would be [to change the policy],” Solomon said. The $50 billion-per-year figure “seems very high to me.”

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