Affordability of ObamaCare Questioned for Low Income Earners

When open enrollment for insurance under ObamaCare begins this October, analysts believe many employees who earn a low income will find the mandatory insurance anything but affordable.

As the name suggests, one of the goals of the Affordable Care Act is to provide “affordable” insurance to all Americans.  But the fact is many Americans will find insurance under the Act to be unaffordable.

The reason for the affordability issue is a simple one:  ObamaCare requires that companies with 50 or more full-time employees offer at least a minimum standard of insurance coverage to those employees.  That insurance coverage must cost an employee no more than 9.5 percent of an employee’s annual income.

But the pricing based on a percentage of income may in fact be too expensive to afford for those earning close to minimum wage.

A full-time employee is defined as anyone working 30 or more hours per week.  That means that those who work 30 hours per week at the current federal minimum wage of $7.25 per hours will earn $11,310 annually.  Insurance under the Affordable Care Act would require that person to pay $1,074 each year for insurance.

When a person is trying to live on just over $11,000 each year, paying close to $1,100 for insurance is a lot of money.  That has left some supporters of ObamaCare frustrated by the costs.

“Some people may not gain the benefit of affordable employer coverage,” noted Ron Pollack, the president of Families USA.  Families USA is a liberal group with a major goal of helping uninsured individuals sign up for insurance coverage in the coming years.

“It is an imperfection in the new law,” Pollack added.  “The new law is a big step in the right direction, but it is not perfect, and it will require future improvements.”

Since such employees will have a theoretically “affordable” insurance option offered to them by their employers, those employees will not qualify to receive tax credits that would help offset the cost of obtaining private insurance.  And if a given employee earns more than approximately $15,900, Medicaid expansion offered under the Act will not be available to them either.

In addition, even if low-income employees find a way to pay for the insurance offered by their employer and still make ends meet, they will find that their insurance coverage does not kick in until they meet deductibles of several thousand dollars.

In the end, many believe ObamaCare is requiring insurance coverage at a cost that many low-income employees simply do not want.  And it does not appear to offer the level of economic relief promised by President Obama.

“Let’s make sure that everybody who is out there working hard and doing the right thing, that they’re not going to go bankrupt because they get sick, that they’re going to have health care they can count on,” President Obama said in the summer of 2012 while campaigning for reelection.  “And we got that done.”

Spokespersons for the White House have downplayed the concerns to date, noting that the number crunching focuses on the worst possible scenario and that many companies will offer less expensive coverage to take advantage of available tax breaks.

If employees do not obtain insurance, they will have to pay fines.  However, experts believe that many employees will simply opt to pay those fines under the initial years of ObamaCare, as the fines will be far less expensive than the cost of the insurance options available to them.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.