When insurance is not affordable, people don’t buy it. This is the root of Arkansas’s public school employee insurance crisis, and it’s also a big part of why so many Americans in general are uninsured. To make teachers’ insurance affordable, their employer’s contribution must increase. The Affordable Care Act’s subsidies fill much the same role as an employer contribution: Obamacare covers part of the cost of buying a private policy for low-to-middle-income people who don’t currently have insurance. Uninsured individuals can now buy private insurance via the exchange that just opened on Oct. 1, and the amount of their monthly premium covered by the government depends on their income. For families at or below 138 percent of the federal poverty line, the full cost of health insurance will now be borne by the feds (thanks in part to Arkansas’ unique “private option”).
Employer contributions and ACA subsidies are both “carrots” to entice people to participate in an insurance pool. But the ACA also has a “stick” — the “individual mandate,” which is the requirement that all individuals buy a decent insurance policy or else get fined. So, Obamacare has a twofold strategy to get Americans insured: financial assistance for those families who can’t afford monthly premiums and the threat of an annual penalty to nudge uninsured people into taking action. If this carrot-and-stick approach works, millions of currently uninsured Americans will get health insurance. This is the goal of the ACA.
Could a “stick” be a part of a teachers’ insurance fix as well, in the form of a mandate for all employees to participate in the group plan (and not, say, their spouse’s insurance)? It’s possible, but politically unlikely. Nonetheless, the ACA’s individual mandate may still boost participation in the public employee plan somewhat.
Affordability and the “family glitch”
Most Americans get their insurance through their employer, and the ACA won’t directly affect most of these people. However, the ACA establishes criteria for affordability that (along with income) determine whether an individual is eligible for subsidies to purchase a plan on the exchange. If an employer offers a decent insurance plan that costs an employee less than 9.5 percent of his or her salary, the employee is expected to go with the employer’s plan and is thus ineligible for the federal subsidy described above.
Some school employees are paying upwards of 30 percent of their income for insurance. Should they therefore be eligible for subsidies? Unfortunately, no, for the most part. Because of an apparent mistake in the ACA’s language, the 9.5 percent affordability threshold only applies to individuals, not to families. For most school employees, the Bronze plan offered by EBD does cost less than 9.5 percent of income for an individual. For a family, though, it’s far, far more than 9.5 percent. This frustrating error in the ACA is being called “the family glitch” and needs to be corrected with legislation, but that is a virtual impossibility considering the state of Congress at the moment.
One bright spot: The poorest of classified employees may now be eligible for a plan on the ACA marketplace and not have to pay premiums at all, via Arkansas’s “private option.” People at or below 138 percent of the poverty line are eligible for the “private option” regardless of whether their employer offers affordable insurance.