Thanks to Obamacare, Americans looking to tie the knot may find that it’s a lot cheaper to stay single.
Last week, the House Oversight Committee released a report and held a hearing to unpack its subject matter: a hidden penalty on marriage created by the structure of the Patient Protection and Affordable Care Act’s (PPACA) tax subsidies for low- and middle-income Americans to purchase health insurance.
Obamacare’s new tax subsidies are linked to the federal poverty level, discriminating against married couples by failing to increase proportionally with household size. Heritage research has shown how two individuals could qualify for more financial assistance to purchase health insurance individually than as a couple, leading many to forego marriage altogether. The difference could amount to several thousand dollars.
The Oversight Committee report reveals just how big the problem may be:
Nearly half of the beneficiaries of the Obamacare tax credit will be single individuals without any dependent children and most of the other beneficiaries will be single parents.… Married couples will receive only 14 percent of PPACA’s tax credits. At most, only two million married couples (out of nearly 60 million married couples) are projected to benefit from the health insurance tax credit in any year through 2021.
Yet another glitch in the legislation exacerbates the marriage penalty. The subsidies to purchase insurance will be available only to individuals and families who do not have an offer of affordable, employer-sponsored coverage. But “affordability” is determined by the cost of a self-only policy, not family coverage.
So a worker may be ineligible to receive a subsidy if he could afford his employer’s self-only coverage, even though he could not afford coverage for his family. If he and his wife stay married, they will receive no assistance to purchase coverage for their whole family, but if they divorce, the worker could carry his employer’s coverage while his wife and children receive taxpayer-subsidized coverage in the exchange. Take the example given in the committee report:
Assume a 40-year old couple with two children: the husband makes $40,000 per year and the wife makes $30,000 per year. The wife’s employer does not offer coverage through work but the husband’s does. The husband’s company provides only self-only coverage and the employee only pays a small percentage of the total premium. This company would satisfy the criteria of the PPACA’s employer mandate provision even though they don’t offer family coverage. Since the husband has access to [employer sponsored insurance], the rest of the family is not eligible for the PPACA tax credits. The family would be faced with the decision of buying private coverage at an annual cost exceeding $10,000 for the mom and kids (unless the kids are covered by the state’s CHIP) or foregoing insurance and being forced to pay the tax penalty instituted by the health care law for individuals who lack health insurance. If the father and mother are unmarried, however, the woman and the two children would qualify for a tax credit of $10,895 to use to purchase a policy that would cost about $12,130.57. Because of the PPACA, marriage costs this family $10,895.
The flawed structure of the Obamacare subsidy program encourages employers and individuals to game the system in order to become eligible, which will drive the cost to taxpayers sky high.
In addition to penalizing marriage, the subsidies create other perverse incentives for employers and their workers. As a recent Heritage analysis explains, the program will increase deficit spending, decrease the number of Americans who pay federal income tax, discourage productivity, and harm the economy.
