View Count: 211 |  Publish Date: February 02, 2013
ACA: Subsidy for Insurance Limited
ACA: Subsidy for Insurance LimitedByDavid Pittman, Washington Correspondent, MedPage TodayPublished: February 01, 2013
WASHINGTON -- The government sets a high bar for affordable when it comes to health insurance.
Proposed Affordable Care Act (ACA) rules, published Wednesday by the Internal Revenue Service (IRS) and Department of Health and Human Services, said the government will look at the cost of coverage for an individual -- not a family -- plan when deciding if an employers plan is affordable.
That is an important distinction since it will govern who will be eligible for subsidies to help pay for insurance, and it sets ground rules for penalties for going without insurance.
The health law will offer federal subsidies to purchase health coverage through an insurance exchange if an individuals share of their employer-sponsored insurance is not affordable. Not affordable is defined in the law as more than 9.5% of the workers household income.
However, the IRS said this week the 9.5% calculation should be based on the cost of individual insurance -- even if the employee was trying to purchase coverage for their whole family.
Someone isnt eligible for federal assistance if their employers individual plan is deemed affordable even if a family plan costs far above 9.5% of a familys income.
The so called family glitch has been bemoaned by patient and child advocates. They said it will limit access to health coverage, which was not the laws original intent.
Medical groups including the American Academy of Family Physicians, the American Academy of Pediatrics, and the Childrens Hospital Association have written President Obama asking him to fix this glitch in the law. They were hoping this could have been fixed in the proposed rules.
They argue individual plans are significantly less expensive, which makes it less likely to top the 9.5% threshold.
The average annual premiums for single coverage in 2012 are $5,615 and for family coverage $15,745, according to the Kaiser Family Foundation.
Kathleen Stoll, director of health policy at the liberal health policy group Families USA, said this would block some families from receiving a premium tax credit under the ACA.
Starting next year, most Americans will be required to have health insurance, while low- and middle-income people can get tax credits to help pay their premiums, unless they have affordable coverage from an employer.
We are disappointed, Stoll told MedPage Today in a telephone interview. But this was clearly a situation where the regulations went as far as they could, and were going to need a legislative fix.
Action must be taken to provide assistance for some low- and middle-income families so they can move from the ranks of the uninsured to the insured, Stoll said.
The proposed rules published by the IRS and HHS explain the eligibility rules for receiving an exemption to the ACAs individual health coverage mandate and the process to receive federal assistance.
HHS also said this week individuals who make less than 100% of the federal poverty level and live in states that dont expand their Medicaid programs wont be subject to penalties. The ACA sought to expand Medicaid to cover everyone up to 138% of the federal poverty level, but after Junes Supreme Court decision, states arent forced to expand at all.
Subsidies through the health insurance exchanges are only available for those making between 100% and 400% of poverty, leaving those not covered by Medicaid now and making less than 100% of poverty in the lurch.
The Congressional Budget Office estimates less than 2% of Americans will owe a penalty under the ACA.
Comments on the IRS rule are due May 2 while a public hearing slated for May 29. Comments on the HHS rule are due March 18.
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