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GAO: Proposed Rule May Leave Some Children Ineligible For Subsidies

By Julie Appleby

July 24th, 2012, 1:04 PM

While most uninsured children will qualify for coverage under the federal health law, a small percentage — 6.6 percent of the total, or at least 460,000 — may be shut out because of how the government proposes to define “affordable” coverage, says a report from the U.S. Government Accountability Office.

The proposed Treasury Department rule says workers and their families are ineligible for federal subsidies for coverage if an employer offers them affordable coverage at work.  An employer’s offer is considered affordable if the worker’s share is less than 9.5 percent of household income. But the rule bases affordability on what a worker would have to pay to cover himself or herself, not on the cost of covering the entire family, which is generally higher.

The agency recommends the Secretary of the Treasury, in consultation with the IRS Commissioner, consider whether an “alternative approach” would be consistent with the goals of the health law. The IRS finalized the rule in May, but it has not finalized the affordability standard.

“Under the proposed standard, an offer of affordable employer-sponsored health insurance to one family member could impede other family members’ access to affordable insurance—an outcome which would not further the broader goals of [the] PPACA,” the report says.

The GAO says the proposed standard could affect more than 460,000 children if states stop funding the Children’s Health Insurance Program (CHIP) beyond 2015. Under the health care law, CHIP is not funded beyond 2015, and even if federal funding is extended,  states may opt to reduce or eliminate programs beginning in 2020, the report said.

Consumer groups have also complained that the proposed rule means the spouses and children of employees who forgo the work-based coverage because of cost would be ineligible for federal subsidies to help them buy private insurance.

4 Responses to “GAO: Proposed Rule May Leave Some Children Ineligible For Subsidies”

  1. There are so many unintended consequences written by the LETTER of the PPACA law, even Democrats are shaking their heads. Want subsidies to pay for health insurance? Your state better have a STATE-BASED exchange, not a federally based exchange. But wait, that’s not what we meant… This goes back to even the guarantee-issue provisions for children. The LETTER of the PPACA law stated that insurance carriers couldn’t access pre-existing condition limitations to children 0-18. Fine, carriers will approve or deny children. OOPS, democrats didn’t quite word that one correctly and Sebilus had to slap the hand of the carriers (high health ins premium = high health care costs??!!) by stating “that’s not what we really meant to say, you HAVE to insure all children”.
    If googling “How do I qualify for ________ doesn’t scare every TAX paying American, then there’s just no hope left.

  2. Jane says:

    Good post, Jennifer. There was not a thorough enough vetting process prior to the passing of PPACA and those who wrote it had a very limited understanding of how the current system works. Then add the promises to pharma and the hospital association along with trying to move toward social medicine and you have a real clustermuck. I just attended a PACA seminar yesterday and am really concerned about the new taxes we will be required to pay. Yes, they are taxes as the forms and payments will be submitted to the IRS. Also of concern is the growing list of mandated coverages. Employers simply cannot afford it and at some point will make the decision to dump the medical plan and pay the penalty. As a company we are not at that point but many that I have spoken with are seriously considering that option. Definitely interesting (and a bit scary) times.

  3. WellRead29 says:

    Well, if you want business to stop offering coverage, going along with the GAO scheme and passing that cost to businesses will cause every one of them to opt out of offering health insurance to their employees. To wit:

    Imagine I’m an owner with 100 employees in 2014. Say my average employee makes $40,000/year. The “employer mandate” in PPACA clearly applies to me. So I have to offer “affordable, essential health insurance coverage” to my employees or pay a fine when they leak to the Exchange.

    Now, under the current IRS interpretation, “affordable” means I can only charge my employee 9.5% or less of his W-2 wages for his individual portion of the insurance coverage. If his policy costs $5,500/year (Kaiser average 2011) then I can ask him to contribute $3,800 and I pay the other $1,700. So I’m in for $1,700 per year. No problem, I might be paying less than that today.

    Now, shift to the GAO requested interpretation. Now we’re buying FAMILY coverage at around $15,500/year, of which, my employee will still only pay his $3,800 and now I’m not paying $1,700, I’m on the hook for $11,700/year for any employee with a dependent or spouse or both!!!

    Guess what, I’m out! I’ll pay my $2,000 year in employee fines and let the chips fall where they may. The other $9,700 will sure come in handy around here….

    If adopted, the new ruling will be the end of employer sponsored health insurance. Since that was the goal of the Obama-ites all along, congratulations! You win! Hope you like your prize.

    WR29

  4. Zubbo says:

    So the above kind of observations are what dominate discussion of an article on Obamacare at Kaiser Health News, eh? Let’s see if we can transform this non-sense into something approaching sense.
    ***
    “Your state better have a STATE-BASED exchange, not a federally based exchange.”

    When you’re citing a “study” from the Cato Institute you are already off to a pretty bad start in trying to objectively assess Obamacare. Subsidies will be available for any exchange, regardless of whether the states decide to implement this concept or not. Anyone saying otherwise has been listening to a rather partisan think-tank.

    ” OOPS, democrats didn’t quite word that one correctly and Sebilus [sic] had to slap the hand of the carriers….”

    What Secretary Sebelius did was enforce that component of the law by telling the insurance companies not to get cute with abiding by Obamacare. I’m glad she did. Calling it “hand-slapping,” as commenter Karen chose to, is a pretty weak attempt to brand the action as authoritarian. There’s nothing wrong with enforcing a law that makes insurers cover children.

    “If googling….”

    Appealing to people that they should perform a Google search to somehow demonstrate what’s wrong with Obamacare is rather strange, at least to me. I’d suggest googling the “Dunning-Kruger” effect first before obeying that kind of command, myself.

    ***
    Since the other two comments more or less amounted to cheerleading Karen’s comment I don’t have much to debunk there. If insurance companies, which the first commenter has identified herself as part of, are upset with Obamacare then that is their problem. We allowed the private sector to police itself for decades and that didn’t work.

    Now have the Patient Protection and Affordable Care Act, and the future for healthcare insurance looks much less bleak. Get informed about because it is here to stay.

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