We-Have-To-Pass-It-To-See-What’s-In-It Fact of the Day
It’s all in the fine print. Does the requirement that employers must provide affordable coverage refer only to the premium charged to the employee? Or does it refer to his dependents as well? If the latter, millions of people will flood the newly created health insurance exchanges, costing taxpayers billions in unanticipated spending:
We show that … the ACA could lead to far more lower-to-moderate income families gaining access to affordable coverage through exchanges or, conversely, to far fewer of these families being covered by ESI [employer sponsored insurance], even if no employers drop their health insurance plans as a result of the new law. Using our stylized models, we find at one extreme that the share of private sector workers covered by ESI would fall by as much as 12.7 percentage points, relative to a case of full compliance with the law, if the ACA affordability coverage rule is interpreted to apply to family coverage and employees directly pay 100 percent of the cost of the ESI in premiums, with compensating higher wages making them no worse off. At the other extreme, we find no changes in the share of private sector workers covered by ESI along this margin if employee contribution shares do not change in the future and affordability is interpreted to refer to single coverage.
As I recall, the difference was something like $60 billion additional spending over five years if the most liberal rules were applied. This includes caping the family premiums at 9.5% of dependant income and allowing employers the flexibility to drop coverage.
This could be disastrous.
The whole bill is a mess and everyone knows it.
I would guess that the Obama Aministration will try to push the cost off on business. Which means, on the workers.
Below-average income families are going to find a way to the exchanges because that is what is in their self-interest. There are no new subsidies at the place of work. There are huge susidies for these folks in the exchanges.
Is this really just an oversight on the part of the lawmakers, or was this some kind of loophole?
Yesterday, August 12th, there were two major developments – the 11th Circuit’s decision, and, new proposed regulations concerning the exchange-based coverage, and, in those proposed regulations, the IRS confirms that the 9.5% test is against “self-only” coverage.
See proposed Treasury Regulation, §1.36B-2(c)(3)(v)(A)(1), which states:
(v) Affordable coverage–(A) In general–(1) Affordability. Except as provided in paragraph (c)(3)(v)(A)(2) of this section, an eligible employer-sponsored plan is affordable for an employee or a related individual if the portion of the annual premium the employee must pay, whether by salary reduction or otherwise (required contribution), for self-only coverage for the taxable year does not exceed the required contribution percentage (as defined in paragraph (c)(3)(v)(B) of this section) of the applicable taxpayer’s household income for the taxable year.
So, assuming that this proposed regulation provision becomes part of the final regulations, and that it is interpreted to mean the affordability test is based on the employee’s contribution being less than 9.5% of household income for self-only coverage, then, the CBO did not understate the cost. However, it is not clear that you will see as much of an expansion in employer sponsored insurance as many sponsors and media supporters/commentators predicted following passage of the Patient Protection and Affordable Care Act.
Combine this with the potential for the individual mandate to be found unconstitutional, and, who knows how this will end… except it won’t be pretty given all the promises made and taxpayer monies already spent (ERRP, PCIP, etc.)