As the IRS finalizes regulations for the Affordable Care Act's individual and employer mandates, the complex eligibility and exemption framework being proposed has some legal analysts worried that working families in certain income brackets won't be eligible for premium support.
At the end of January, the Internal Revenue Service (IRS) and the U.S. Department of Health and Human Services (HHS) jointly published rule proposals for the ACA's shared responsibility provision, the process for determining any of nine exemptions and the process for calculating any tax. The IRS also separately published final regulations for premium tax credits and proposed rules for employer responsibilities.
In the premium tax credit assistance regulations, the IRS defines "affordable" employer-sponsored coverage as a health plan with employee costs of less than 9.5 percent of his or her modified adjusted gross household income. Employees in certain income brackets with coverage costs above that threshhold would be eligible for premium assistance, but the IRS says in the employer mandate rule proposals that an employer has to offer coverage for an employee and their dependents -- not their spouses -- and that employers can charge more for dependents.
That's a fairly narrow band of eligbility for premium assistance and could leave a number of families struggling to afford insurance, Washington and Lee University law professor Timothy Jost wrote in a Health Affairs blog.
With employers being able to meet "play or pay" affordability requirements via three safe harbors, Jost thinks that the trend will move to offer employee-only coverage rather than family coverage. And if the "employee's dependents are not eligible for premium tax credits," he said, "they may simply have no way of affording health insurance, and thus remain uninsured."
Jost also pointed to a Government Accountability Office estimate that the IRS's interpretation of these ACA provisions could leave up to 460,000 American children ineligible for coverage. "The total number of persons who would remain uninsured may well be in the millions," said Jost.
As health insurance companies continue to worry about a legal dilution of the individual mandate and possible non-compliance among young people, corporate trade groups, consumer activists and children's advocates are criticizing the IRS proposals.
"The administration recognizes that the cost of family coverage will be unaffordable for many families. They will not have to pay the penalty," Bruce Lesley, president of the child advocacy group First Focus, told the New York Times. "But that will not be much of a consolation to families who cannot get health insurance for their kids."
Paul W. Dennett, senior VP of American Benefits Council, told the Times: "Individuals who do not have affordable family coverage should be eligible for premium tax credits in the exchange. The final rule does not provide that."
Jost, a consumer representative on the National Association of Insurance Commissioners and a noted ACA supporter, is concerned as well. The "bottom line," he said, seems to be that the employer "will not be penalized if family coverage is unaffordable as long as self-only coverage is affordable...the employer will have satisfied the employer responsibility requirement, even though family coverage is unaffordable."
Moreover, he predicted, the "federal government will pay less for premium tax credits as fewer people will be eligible. And hundreds of thousands, probably millions, of children (and spouses) will remain uninsured."
Meanwhile, certain employees may be facing similar complexity, Jost said. Some individuals could end up accepting an affordable self-only plan through work, while not having to purchase dependent coverage if the plan would cost more than 8 percent of household income. Otherwise, non-exempt individuals may have to choose between keeping ACA-minimum coverage for their dependents, or paying the shared responsibility tax.