ObamaCare’s “Family Glitch” Exposed

Obama signs ObamaCare

Let’s put aside for a minute that ObamaCare is unconstitutional, adds $6.2 trillion in debt, piles on countless new taxes, and has already racked up $31 billion and 71.5 million hours in regulatory compliance costs.  Yes, that’s a lot to put aside.  But for just a moment assume the role of a liberal with an entitlement mentality.  For a law with enormous riches and political capital invested in it, wouldn’t you expect it to at least function on its most basic level consistent with its namesake?  In other words, you would expect for the Affordable Care Act to provide affordable coverage.

The latest of ObamaCare’s fundamental flaws to be euphemistically reported as a “glitch” that needs to be “tweaked” is its failure to provide affordable family coverage for a broad group of employees.  As a result, Kaiser Family Foundation estimates that 3.9 million family dependents may not be able to afford employer-sponsored family coverage or receive subsidized coverage on an ObamaCare exchange.

Understanding the family glitch requires a quick primer on the byzantine regulatory structure governing Obamacare’s subsidies:

— Employers must offer coverage meeting a number of requirements to full-time employees to avoid the pay or play penalties (see here for examples).

— The affordability component of the employer pay or play rules requires that the employee share of the premium for self-only coverage not exceed 9.5% of the employee’s income.

— Employees whose family income is under 400% of the federal poverty line ($94,200 for a family of four) generally are eligible for subsidized coverage on the ObamaCare exchange.

— However, employees who are eligible for affordable employer-sponsored coverage are not eligible for the ObamaCare exchange subsidies.

— The problem is that coverage is considered affordable if the self-only cost of coverage does not exceed 9.5% of the employee’s income.  There is no such cost limiting requirement for family coverage.  The IRS recently confirmed this glitch by re-finalizing the ObamaCare exchange subsidy regulations with a new example to highlight the flaw.

So here’s the predictable scenario: Employer offers affordable coverage for employees (i.e., an employee’s share of the premium is less than 9.5% of his income), but the employer does not contribute any amount toward the additional premium to cover the employee’s family dependents.  Premiums for ObamaCare-approved coverage will increase significantly in 2014, which means that an employee’s added cost to cover his spouse and children will be enormous.  There is no penalty to the employer for not contributing toward the family coverage — all that matters is that the employer offers affordable self-only coverage.

The “glitch” is that the employee in this scenario cannot instead choose to purchase affordable family coverage on the (likely even more expensive) ObamaCare exchange.  Why?  Because the employee is eligible for affordable self-only coverage offered by his employer.  The fact that the employer’s family coverage is unaffordable is irrelevant for purposes of the determination that the employee is not eligible for the ObamaCare exchange subsidies (and good luck to anyone who has to pony up the full cost of so-called Qualified Health Plan (QHP) ObamaCare exchange coverage without the premium tax credit).  The end result is that the employee is left with no affordable family coverage option.

(Not confused yet?  Check out this flowchart by Sarah Kliff from the Washington Post’s Wonkblog for a more complete exercise in this regulatory morasse.)

Senator Ron Wyden (D-OR) is an interesting politician.  On one hand, he should be commended for making principled decisions against the party line to support the Paul Ryan Medicare proposal and to stand with Rand.  He has also been the most vocal member of Congress on this family glitch issue.  But he’s still a liberal, and his call for expanded government subsidies to address the glitch is not the answer.

The clear response should be that if despite unprecedented levels of federal government intrusion, spending, and taxation, ObamaCare can’t even remotely achieve its core purpose to make coverage affordable for families, then the whole system needs to be replaced.  In other words, recognize that government-driven health care just does not work.

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