Lack of Clarity over IRS Healthcare Rules may Jeopardize Many

By 2014, the US government will enforce a mandatory health insurance requirement that will affect most Americans. But those in the lower and middle-income group will receive subsidies to purchase health insurance through tax credits, unless they have access to affordable coverage from an employer. But there is uncertainty on how the word “affordable” should be interpreted. The law states that employer-sponsored insurance is not affordable if an employee’s share of the premium is more than 9.5 % of his or her household income. The IRS rules say that this 9.5% should be calculated based on the cost of coverage for the individual employee i.e. “self-only coverage” or coverage only for self not family. But those who disagree with the 9.5% say the IRS rules should also take account of the costs of covering the family (spouse and children) because health insurance for the family is more expensive thus people would require subsidy for family coverage.

In May, the IRS issued final rules for the health insurance premium tax credit, but postponed deciding on the affordability of family coverage.

According to a survey, premiums for employer-sponsored health insurance cost an average of $ 5,430 a year for individual and $ 15,070 for family coverage. The employee’s share of the premium averaged $ 920 for individual coverage and $ 4,130 for family coverage. Under the IRS rules, for a family that earns an average of $ 35,000 per year such premiums would be considered affordable, even though it amounts to about 12% of its income.

Many people who support the healthcare law say that it is in danger of leaving millions of people in the lower middle class uninsured and thereby oppose the intention of the law, which is to extend coverage not restrict it. According to Bruce Lesley, the president of First Focus, a child advocacy group, “This is a serious glitch. Under the proposal, millions of children and families would be unable to obtain affordable coverage in the workplace, but ineligible for subsidies to buy private insurance…”.
The government has to balance between providing subsidy to those who need it and keeping costs down for itself. On the other hand, changing the rules that require employers to provide affordable coverage to family members in addition to employees would increase the costs for many employers.

The task of enforcing the healthcare law has been given to the IRS who grants the tax credits and imposes penalties for those who do not purchase the mandatory health insurance. According to the law, an employer with 50 or more full-time employees may be subject to a tax penalty if it does not offer coverage to “its full-time employees (and their dependents).”

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