Under the new health care reform law, if an employer’s group health insurance is considered unaffordable — a cost to the employee of more than 9.5% of household income — the employee would be eligible for tax subsidies through a health insurance exchange.
As the law was originally interpreted, if the employee was also purchasing coverage for his or her dependents, the employee’s dependents would be eligible for subsidies if 20% of household income went toward the cost. Congress’s Joint Committee on Taxation now views the law differently and has determined the subsidies are for the employee only.
Here’s an example of what could happen: An employee purchases insurance through his employer. The employer pays 88% of the employee portion of the premium, but the employee also needs to pay to cover his dependents. The employee cost is less than the 9.5% of household income. Yet the cost of adding his dependents to the plan is unaffordable. Under the new interpretation, the employee’s dependents would not qualify for tax subsidies.
The change to the law’s interpretation is a huge blow for affordable health insurance. As a result, some experts predict a 95% increase in the cost of health insurance in the individual market, in addition to current rate increases. A healthy person currently getting a good deal in the individual market could suffer because of cost redistribution. An increase of this size could have a crushing effect on the middle class, especially for those who are self-employed.
Have you seen a substantial increase in the cost of your health insurance? Are you aware of your options?