This article first appeared in the St. Louis Beacon, Aug. 23, 2012 - Among the many aspects of the Affordable Care Act that legislators, government agencies and health professionals are continuing to parse is the definition of “affordable” when it comes to employer-offered health insurance.
Starting in 2014, the law will require most Americans to have health insurance. Low-income people can get help from the government by way of tax credits and subsidies to pay their premiums if they do not have affordable coverage from their employer.
However, the Internal Revenue Service has proposed rules that could leave some working-class families unable to afford family coverage offered by their employer and yet ineligible for ACA subsidies.
For employer-offered insurance to be considered affordable under the law, an employee’s portion of the premium must be no more than 9.5 percent of their household income. The IRS proposed rules say this number should be based on the price of individual coverage, but others say the administration needs to include the costs of covering children and a spouse.
Many lawmakers and consumer advocacy groups oppose the IRS interpretation of the law. According to an Aug. 11 article in the New York Times, Democrats who pushed the law through the House in 2009-10 wrote a letter to the administration, saying: “The effect of this wrong interpretation of the law will be that many families remain or potentially become uninsured.”
Sidney Watson, a law professor who specializes in health law at Saint Louis University School of Law, said while she feels the proposed interpretation is concerning, it may very well change before a final decision is made.
“There’s an opportunity for public comment and then the agency always takes those comments into account. It’s actually a way to pick up issues like this. They can’t anticipate everything when they’re working quickly to get things out,” Watson said.
An annual survey conducted by the Kaiser Family Foundation in 2011 reported that average annual premiums for employer-sponsored health insurance are $5,429 for single coverage and $15,073 for family coverage. When looking at the employee-paid share of the premium, the cost for family coverage was four times as much as individual coverage.
“My guess is the IRS doesn’t have that much experience thinking about costs of health insurance and they may not have anticipated the consequences of including only an individual policy and not the whole family,” Watson said.
Even for those who currently have employer-sponsored coverage, the new law and this interpretation have put many on edge. Lenore Harner, who works at Fox Sports Midwest, said that as a single parent she has been happy with the “employee plus one” coverage she receives from her employer. She recognizes, though, that if her situation was slightly different, she could be greatly affected by the IRS interpretation.
“That’s a window where you gotta watch where you fall in and what you pay,” Harner said, referring to the group that could be left uninsured by the 9.5 percent threshold. “I would be an employee plus one, so more than individual coverage. I wouldn’t fall under it right now but if they raised the insurance costs for me, things could change.”
The Affordable Care Act says an employer with 50 or more full-time employees may have to pay a tax penalty if it does not offer coverage to full-time employees and their dependents. Yet the law does not mention dependents when explaining how the penalty will be calculated, according to the New York Times article.
The consequences of these rules are difficult to predict, according to Watson. Especially in St. Louis where medical costs are already high, Watson says employers may need to make tough decisions.
“That penalty is less than the price of either individual coverage or family coverage. We don’t know yet how many employers may try to stop offering insurance to their employees in favor of just paying the penalty,” Watson said.
In Massachusetts, where a similar health insurance program has been in place for more than five years, health care economists initially predicted this outcome. However, the percentage of employers offering health insurance in Massachusetts rose, according to Watson. She attributes this in part to the individual mandate, which she says has raised the profile of health insurance, making it a desirable benefit that companies use to attract good employees.
Sherry Ward, vice president of corporate services at St. Louis-based Maritz, said her company is watching the discussion around the new law closely, but that it plans to continue offering health insurance for now.
“We’ll probably look at [dropping insurance coverage] just like our other employer competitors, but we wouldn’t be the first to opt for that because we are committed to offering insurance to our employees right now,” Ward said.
She emphasized that many factors will go into the company’s decision.
“We expect, at least for the first year, to assess what’s going to happen,” Ward said. “We are also looking at the fact that exchanges have not been developed here in Missouri or the majority of the other 43 states where we have employees. We have six key states where we have a majority of people and none of those states have developed exchanges so far.”
Even after the affordable insurance exchanges begin operating in 2014, Watson says it could be years before we see how the effects fully play out. For now, she hopes the process of the public critiquing the proposed rules will work the way it’s supposed to.
“The process in which the IRS proposes rules and then hears criticism of them is a really important public process in instigating legislation,” Watson said. “If we’re really serious about getting everyone health insurance coverage, making sure they have preventative care, (pediatric) care, and catastrophic care in case you get cancer or are in an auto accident, we ought to use an affordability test that counts the entire family, because everyone needs health insurance.”