Obamacare Will Leave Millions of Low-Income Americans w/o Health Insurance

Although the stated objective of the Affordable Care Act -- Obamacare -- was universal health insurance, the non-partisan Congressional Budget Office projected in May that the number of uninsured will settle at 30 million from 2016 onwards, down from 55 million today.

One reason is that millions of low-income Americans will be unable to get subsidized health insurance through the exchanges. If they are married to someone who has affordable single-family coverage from an employer — coverage that the worker is obligated to accept — they will not be eligible for premium subsidies on the exchanges.

Without subsidies, low-income families will not be able to afford Obamacare. The Internal Revenue Service estimates that family plans will cost $20,000 (in after-tax dollars) a year by 2016.

Anyone under 400 percent of the poverty line, currently $94,000 for a family of four, qualifies for a subsidy — unless a family member has employer-provided insurance.

I wrote about this here in November 2011. Congress did not fix the problem, and with the October enrollment date for Obamacare the issue is getting increased scrutiny.

Cornell University professor Richard Burkhauser, Indiana University professor Kosali Simon and Cornell PhD candidate Sean Lyons estimated in 2011 that 13 million low-income Americans may be unable to get subsidized health insurance in 2014 due to this provision of the law.

On Monday, USA Today quoted Joan Alker, executive director of the Georgetown University Center for Children and Families, saying, "The family glitch is definitely a drafting error that Congress made that needs to be fixed."

But it was not a drafting error. It was a deliberate effort to keep costs down.

Early drafts of the Affordable Care Act in the summer of 2009 required employers to offer affordable care to employees and their families, and prevented families from migrating to the exchanges.

When employers protested that this mandate would be too expensive, the requirement was changed to employees-only. But the provision preventing families from going to the exchanges stayed.

Allowing the rest of the family to get subsidized coverage on the exchange would have raised the cost of the law above the $1 trillion threshold, possibly dooming the bill to failure.

So drafters intentionally left low-income family members out of the system.

American Enterprise Institute economist Joseph Antos told me, “The intentional exclusion of family members from coverage under subsidized insurance through the exchanges meant that the Act was scored as reducing the deficit, rather than increasing it. That was the key to passage among fiscally-conservative Democrats.”

Perversely, low-income families would be able to get subsidized insurance only if the parents divorced. Some may postpone marriage as a consequence. This is yet another way that the government discourages strong and stable families.

Married workers may rationally prefer to work for firms that do not offer health insurance. In that way, they can qualify to purchase family coverage through the exchange, and get a subsidy.

If the employer does offer health insurance, workers with families might prefer to work for firms that provide unaffordable coverage. If the coverage is unaffordable, then the employee will be able to decline it and buy subsidized insurance for his family on the exchange.

The uninsured will get care from emergency rooms and community centers, the situation that Obamacare is supposed to solve.

The obvious solution is to end the employer requirement to provide health insurance, give everyone a refundable tax credit to buy health insurance either on or off the exchange, and allow all plans—small, medium, generous—to be sold on the exchanges.

Then, just as people choose their auto and home insurance policies, let them choose their health insurance plans.

This piece originally appeared in Washington Examiner

This piece originally appeared in Washington Examiner