Affordable Care Act: Unaffordable for Some

In an ironic twist, it’s turning out that the Affordable Care Act — known to some as Obamacare — may be unaffordable for some low-wage workers because of a loophole that gives employers credit for offering “affordable” insurance that low-wage employees can’t afford. The problem lies in the definition of what’s affordable, literally, in the law itself.

Employers with 50 or more employees are required to offer health coverage that costs no more than 9.5% of an employee’s pay. That defines affordable coverage and satisfies an employer’s requirement.

But the problem is that another part of the Affordable Care Act denies tax subsidies to low-wage workers if they have a job that gives them affordable coverage. For someone earning $21,000 a year, that would mean that health insurance would cost them $1995 a year. And then, deductibles could add another $3,000 to annual medical costs. The final blow comes because low-wage workers earning more than $15,900 won’t be eligible for the Medicaid expansion that’s part of the Act.

Talk about your unintended consequences. Even Ron Pollack, President of Families USA and a big supporter of Obamacare, says:

Some people may not gain the benefit of affordable employer coverage. It is an imperfection in the new law. The new law is a big step in the right direction, but it is not perfect, and it will require future improvements.

For now, the administration is putting the best face it can on the problem. Senior communications advisor Tara McGuinness says:

There has been a lot of conjecture about what people might do or could do, but this hasn’t actually happened yet. The gap between sky-is-falling predictions about the health law and what is happening is very wide. Most businesses want to do right by their employees and will continue to use tax breaks to provide quality coverage to their workers. Health insurance is tax deductible for employers, and the health law provides additional tax breaks to help small businesses.

Expect more nervousness and dire predictions as implementation begins.

Click here to read more in the Huffington Post and click here to read more in the Washington Post.

Check Please, Photograph © moriza / flickr

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