Saturday, April 20, 2024
Hawai'i Free Press

Current Articles | Archives

Monday, May 13, 2013
ObamaCare’s Unfair Treatment of Middle Class Families
By NCPA @ 4:38 PM :: 4586 Views :: Health Care, Taxes

ObamaCare’s Unfair Treatment of Middle Class Families

Middle income families are about to encounter some real surprises as a result of the Affordable Care Act (ObamaCare). For example, many workers will soon discover that when they earn more money, they end up with less take-home pay. Others will discover that they are worse off if their employer offers them “affordable coverage” than if there is no health insurance offer.

What causes these bizarre outcomes? Read on.

Milliman’s Employee Benefit Research Group reports that under the IRS final rule, the affordable coverage requirements in the ObamaCare law apply only to single coverage for each employee. No matter how high the premium for family coverage, it is not counted in the affordability calculation.

Even so, an employee’s family members will not be eligible for health exchange premium subsidies as long as they are eligible to enroll in an employer plan that is deemed “affordable.” Firms with more than 50 employees must offer coverage for dependents, but not for spouses.

Meeting any one of the following conditions qualifies a plan as “affordable:”

  1. The employee share of the premium is not greater than 9.5 percent of an employee’s W-2 income.
  2. The employee share of the premium is not greater than the employee’s hourly rate of pay times 130 hours.
  3. The employee share of the premium is not greater than 9.5 percent of the federal poverty level for a single individual ($1,092 in 2013).

Here are some sample calculations for a wage earner couple with two children living in a state that offers Medicaid to households with incomes at or below 133 percent of the federal poverty level (FPL). Because the law allows 5 percent of income to be “set aside,” this is functionally equivalent to offering Medicaid to families with incomes under 138 percent of the federal poverty level. The federal poverty level for a family of four is currently $23,550. Allowing for the income set-asides and multiplying by 1.38, this family would be eligible for Medicaid as long as it doesn’t earn more than $32,499.

Now, suppose that the family earns an additional $501. It will now be ineligible for Medicaid. If the employer does not offer affordable coverage, the family will have to turn to a health insurance exchange.

According to the Kaiser Health Reform Subsidy Calculator, the premium cost for family coverage purchased through an exchange will be $1,143 per year (3.46 percent of annual income). Yet, after paying this premium and paying the additional federal income taxes it owes, this family is actually worse off as a result of its higher earnings. (See the table).

On average, however, the family will be much worse off if the employer offers affordable coverage. To be affordable, the employee’s premium for his own coverage cannot exceed 9.5 percent of his W-2 wages, or $3,135. But the employer can charge any amount for other family members. Assuming the employee must pay the national average family premium ($4,316), the employee will have about $4,000 less take-home pay!

The table below follows Chief Justice Roberts in classifying required insurance premiums as a tax. The base case is a family of four earning $32,499, enrolled in Medicaid. Marginal taxes are calculated as the sum of additional taxes ($54 as federal income tax rises from $699 to $753) plus additional premiums divided by the additional income earned ($501).

Effect of Earning More: $32,499 → $33,000

 

Premium Payments

(Insurance “Taxes”)

Additional Federal Income Tax

Change in all “Taxes” Divided by Change in Income

Percent Change in Marginal Tax

Get subsidized family coverage in an exchange

$1,143

$54

$1,197/$501

238%

Buy family coverage from employer, average subsidy

$4,316

$54

$4,370/$501

872%

Go bare, pay 2016 penalty (2.5 percent of income)

$825

$54

$879/$501

175%

Go bare, ignore penalty

0

$54

$54/$501

11%

If the family manages to increase its earnings by $17,501 to $50,000, roughly the U.S. median income, it will still be better off if its employer does not offer coverage, as it would be able to purchase a subsidized family exchange policy for about $1,000 less than if its employer offered coverage at average subsidy rates.

But a family that goes “bare,” ignoring the penalty/tax, would enjoy an income increase of $16,588 net of federal taxes. It would be able to buy a lot of routine medical care for the $3,385 that Kaiser says it would have to pay for a subsidized exchange policy, and it would still be able to sign up for coverage when it wants other people to bear its medical costs.

There are worse things than not having health insurance. One of them is enduring the high taxes and arbitrary, unfair, treatment meted out by comprehensive health reform. Apparently the reason why we had to pass the bill in order to find out what was in it is that had the proposed law been exposed to the normal deliberative process, no decent person would have voted to expose families to this kind of treatment.

---30---

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

Aloha Pregnancy Care Center

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT