California workers paid premiums averaging 26.2% of their household income to get health care coverage for their families through their employers in 2020, but a change in tax rules gave 391,000 state residents a way to reduce these costs.
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The Biden administration decided this week to eliminate the so-called “family issue,” giving 391,000 California residents a way to cut those costs starting this week.
When the US Affordable Care Act took effect, it prevented workers from buying insurance coverage for their families on state grants if they could get an employment-based policy for themselves. which cost less than about 10% of their household income.
The problem was that while workers could get policies for themselves at this rate, they were paying far more of their household income to include their partners and children in the policies.
Thus, the Internal Revenue Service and the US Treasury Department have now changed this regulation. Workers can now insure their partners and children through Covered California if the cost of an employer plan for them exceeds 10% of household income.
“The door to more affordable health coverage is opening to hundreds of thousands of Californians today,” said Jessica Altman, executive director of Covered California. “There are families across California who will now be able to save hundreds of dollars a month, and thousands of dollars a year, if they switch from employer-sponsored coverage to a covered California plan.”
Using a computer-simulated model, health policy experts from the University of California, Berkeley and the University of California, Los Angeles projected the impact of the family issue and the new regulations.
They noted that 615,000 Californians – partners and children of workers – would have been caught up in the glitch in 2023. About 80% of them are enrolled in employment-based insurance plans and 38% are children.
Nearly 391,000 of those caught in the glitch would qualify for subsidies on Covered California, the state-based insurance exchange, noted health policy researcher Miranda Dietz of the UC Berkeley Labor Center. She worked with colleagues at the UCLA Center for Health Policy Research to examine the impact of changes in IRS regulations before they were approved.
The idea would be to prevent families from paying more than 10% of their household income for health insurance, a figure the Affordable Care Act uses to measure whether coverage is affordable, Dietz said.
Use two plans to save money
In a presentation to the Covered California board, she gave an example of what change could mean for a family of four with an annual household income of $76,700. If the premiums for insuring the family were $1,000 per month, that would be 15.6% of the family’s annual income.
But what if they could buy an employment-based policy for the single worker and then get subsidized coverage through Covered California? They would pay $200 a month through pre-tax payroll deductions and $320 a month in after-tax family bonuses. Dietz said that would be 8.1% of family income.
Essentially, Dietz’s example showed that a family could cut their expenses in half. Yet, she said, the simulation predicted that only 149,000 of those eligible for the subsidies would actually benefit for their coverage in 2023.
“You get two different plans that could have two different franchises,” she said. “Even if you’re one of the 391,000 people eligible for grants, you may still decide it’s best to stick with your type of expensive employer plan because it might cover more. You don’t have the two-plane problem. You don’t have both deductibles. It is complicated.”
These projections aren’t an exact science, Dietz said, because you can’t know how many people will be told about this change and, once they do, how they’ll react once they’ve weighed all the variables. . As word spreads, Dietz said, the number of people accepting the offer should increase.
Extended Health Care Subsidies
There’s another important variable here, Dietz said. The federal government has extended until 2025 a key financial aid it offered last year, increasing the grants it paid to those who were already eligible and extending them for the first time to people living over 400 % of federal poverty line.
With that help, included in a 2021 federal COVID-19 stimulus law, two out of three covered California enrollees can get branded coverage for $10 a month or less, Altman said during his stops to promote the agency open registration. period ending on January 31.
Of the 149,000 Californians Dietz’s team said would enroll through Covered California, 97,000 were previously enrolled in employer-sponsored insurance, 38,000 were uninsured, and 14,000 were enrolled in the marketplace. individual without subsidies.
“In addressing this critical issue, the Biden administration is building on the Affordable Care Act and its mission to expand access to quality health care coverage,” Altman said. “Covered California is offering new tools to help people see if they’re eligible, and we’re reaching out to consumers who could benefit from this landmark decision.”
Cathie Anderson covers health care for The Bee. Growing up, her blue-collar parents paid for care out of their own pockets. She joined The Bee in 2002, with roles including business columnist and editor. She previously worked at newspapers such as Dallas Morning News, Detroit News and Austin American-Statesman.
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