The new health care law is known as the Affordable Care Act. But Democrats in Congress and advocates for low-income people say coverage may be unaffordable for millions of Americans because of a cramped reading of the law by the administration and by the IRS in particular.
Under rules proposed by the service, some working-class families would be unable to afford family coverage offered by their employers, and yet they would not qualify for subsidies provided by the law.
The fight revolves around how to define “affordable” under provisions of the law that are ambiguous. The definition could have huge practical consequences, affecting who gets help from the government in buying health insurance. Under the law, most Americans will be required to have health insurance starting in 2014. Low- and middle-income people can get tax credits and other subsidies to help pay their premiums, unless they have access to affordable coverage from an employer. The law specifies that employer-sponsored insurance is not affordable if a worker’s share of the premium is more than 9.5 percent of the worker’s household income.
The IRS says this calculation should be based solely on the cost of individual coverage for the employee, what the worker would pay for “self-only coverage.” Critics say the administration should also take account of the costs of covering a spouse and children because family coverage typically costs much more.
In 2011, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,430 a year for single coverage and $15,070 for family coverage. The employee’s share of the premium averaged $920 for individual coverage and more than four times as much, $4,130, for family coverage. Under the IRS proposal, such costs would be deemed affordable for a family making $35,000 a year, even though the family would have to spend 12% of its income for full coverage under the employer’s plan.