At the hearing of the health subcommittee of the House Committee on Oversight and Government Reform, Cornell University economics professor Richard Burkhauser showed that in 2014, millions of low-income Americans may be unable to get subsidized health insurance through the new health care exchanges.
It’s true that under Obamacare, firms with more than 49 workers have to offer affordable health insurance coverage to full-time employees or pay a penalty. But the coverage only has to be for an individual policy, not a family policy.
And what most people don’t know is that if a worker receives coverage for a single person from his employer, his family will not be able to get subsidized health insurance coverage under the exchange.
This is because, if one member of a family receives employer-sponsored health insurance, other members of the family cannot receive subsidized coverage under the exchange.
Other family members would have to purchase full-price health insurance, which would be prohibitively expensive for those at low incomes, those who are supposed to be protected.
Burkhauser testified that, for a four-person family at 133 percent of the poverty line earning $28,000, purchasing a family health insurance plan would cost 43 percent of family income, without government subsidies.
If that family earned $53,000, reaching 250 percent of the poverty line, the plan would cost 23 percent of their income.
About 13 million dependents of workers with single coverage would potentially be affected, according to Burkhauser. That’s 26 percent of the estimated 50 million uninsured workers.
This perverse incentive has a number of consequences, none of them foreseen by Obamacare architects.
Workers with families will prefer to work for firms that do not offer health insurance. In that way, they can qualify to purchase family coverage through the exchange, using government subsidies. For a family at 133 percent of the poverty line, premiums will be capped at 2 percent of income.
If the firm does offer health insurance, the worker with dependents will prefer that the coverage is unaffordable. That’s not a typo — if the coverage is unaffordable, then the employee will be able to buy health insurance for his family on the exchange.
A firm that offers unaffordable coverage will have to pay a penalty of $3,000 per worker. But workers would prefer to receive a lower salary, have the employer pay the $3,000 penalty, and be able to buy subsidized health insurance on the exchange.
This causes substantial disincentives to marriage. Say that Jeff, who receives health insurance from his employer, wants to marry Jane, who is buying her health insurance from the exchange. If they married, then Jane would no longer be able to buy subsidized coverage from the exchange.
Or, take Sally and Steve, married with two children, earning below 400 percent of the poverty line (about $90,000 for a family of four). Sally is a stay-at-home mom.
Come 2014, Steve’s employer will only be required to provide affordable coverage for him. If they were to get divorced, Sally could buy subsidized family coverage through the exchange.
The Congressional Budget Office estimated that in 2019 another 3 million people will be covered by the health exchanges because of employers dropping coverage.
But with employer affordable health coverage only applying to singles, this number will be far greater, resulting in higher costs for the new law and higher federal budget deficits.
Yes, health care will be affordable for low-income Americans — but only if they’re unmarried.
Diana Furchtgott-Roth is former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research. She is a columnist at the Washington Examiner where this piece first appeared.