Friday, February 01, 2013

Obama admistration defines "affordable" in a way denying subsidies to some lower income families

What does the affordable in the Affordable Care Act mean? It means exactly what the IRS says it means and now the IRS has had its say in that regard. See here for the NYT news report on this IRS ruling.

Quoting the NYT article:

"In deciding whether an employer’s health plan is affordable, the Internal Revenue Service said it would look at the cost of coverage only for an individual employee, not for a family. Family coverage might be prohibitively expensive, but federal subsidies would not be available to help buy insurance for children in the family."

Affordable means affordable coverage for the individual employee not for his or her family. If the employee share of the employer subsidized coverage exceeds 9.5% of the family's annual income then the family would be eligible for a federal subsidy.But,the percentage applies only to the cost of coverage for the employee and not for the entire family and the cost of family coverage is significantly higher than for single coverage. So if the company insurance does not include the family many employees will be faced with costly insurance with no government subsidy.

This interesting brand  of social justice administered by the IRS was countered by the Secretary of HHS exempting folks screwed over by this ruling from any penalty (or tax as Justice Roberts might say) resulting from this IRS ruling.

Many, if not most large, companies which already provide health insurance do so for the entire family not just the employee so no one has a good estimate regarding how many would be affected.The Times article claimed millions.

Speaking of affordable,the IRS has released educational material explaining how the penalty (they apparently have not read Justice Robert's decision that made the penalty a tax) for failure to buy health insurance.First, they say that in 2016 the cheapest insurance allowable (bronze plan)  will cost $ 20,000 for a family of five.See here for news article.

Next they reveal in typical IRS language how the "penalty will be computed.

 "(ii) For each month in 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section, the applicable dollar amount is $2,780 (($695 x 3 adults) + (($695/2) x 2 children)). Under paragraph (b)(2)(i) of this section, the flat dollar amount is $2,085 (the lesser of $2,780 and $2,085 ($695 x 3)). Under paragraph (b)(3) of this section, the excess income amount is $2,400 (($120,000 - $24,000) x 0.025). Therefore, under paragraph (b)(1) of this section, the monthly penalty amount is $200 (the greater of $173.75 ($2,085/12) or $200 ($2,400/12))."

If you had wondered about the role of the IRS in health insurance ,that quote should give a flavor.What did you expect?

1 comment:

Anonymous said...

The IRS waited until after the election to define "affordable"