Obamacare Penalizes Marriage

Mary Crookston

10/27/2011 12:01:00 AM - Mary Crookston

One of the many things people failed to fully realize about Obamacare until after its passage is that it discourages marriage. Heavily.

A subcommittee of the Committee on Oversight and Government Reform held a hearing Thursday, October 27 aptly entitled “Examining Obamacare's Hidden Marriage Penalty & Its Impact On The Deficit.”

Out of four witnesses present, three agreed the Affordable Care Act needs reformed to eliminate this penalty. This ratio is nearly in lockstep with the American public – 79 percent of voters say the marriage penalty in Obamacare is unfair, polls say.

Diane Furchtgott-Roth, senior fellow at the Manhattan Institute for Policy Research, said that it discourages women to marry -- and discourages them from working once they are married. She said in her testimony:

Say Sally is a single mother earning $44,130, putting her and her baby at 300 percent of the poverty line. They would be eligible for the health insurance premium assistance credit. But what if she wants to marry Sam, the father of her child, who earns $43,560, and is at 400 percent of the federal poverty line? Their total earnings, at $87,690, would exceed the 400 percent poverty line for a family of three ($74,120). Married, they would no longer receive help with their health insurance premiums, despite both earning the credit when unmarried.

Furchtgott-Roth believes that the government needs to be encouraging marriage instead: "It makes healthier families and smarter children," she said during the question and answer period.

What's important to understand about these figures is that the subsidies provided by Obamacare are based on income relative to the poverty line. An editorial by The Washington Times gives an example of what this means:

The subsidies are suddenly and completely cut off once somebody reaches 400 percent of the official poverty-level income ($63,360 in 2016). The arithmetic is complicated, but what it means is that two unmarried persons earning $32,000 each ($64,000 total) would pay a maximum combined $5,684 in premiums, but if they got married, they would pay about $15,000. That is an astonishing penalty of 164 percent. It is almost impossible to imagine a policy that could be any more anti-family than that.

The staff report compiled by the Committee on Oversight and Government Reform pointed out another anti-family component: "The Administration has proposed a rule that if one spouse is offered health insurance at work, then no one in the family is eligible for the tax credits. """" This is a huge financial burden on middle-income families. Say a husband with a stay-at-home wife and four children receives healthcare from his employer -- he has to provide unsubsidized healthcare for the rest of his family at significant personal expense. But if his stay-at-home wife was instead the "single" mother of his children -- she would be free to receive subsidies.

The hearing also addressed general budget issues beyond the marriage penalty. The committee's report raised the issue of companies choosing not to offer healthcare, and instead leaving their employees' healthcare in the hands of the government.

Under Obamacare, the tax code will continue to treat otherwise identical individuals very
differently, depending on the source of their health insurance. Many workers and
employers will have a significant incentive to drop employer-sponsored health insurance
because of the sizeable health insurance tax credits created by the law. For example, a
family of four headed by a 50-year old making around $50,000 per year will benefit by
approximately $7,500 from not receiving health insurance. Employers dropping ESI en
masse would lead to a staggering increase in the budget deficit. 

Wal-Mart, America's largest private employer, chose last week to cut health care benefits to part-time employees working less than 24 hours per week. Witness Richard Burkhauser, a professor from Cornell University, is unsurprised by this decision: "Walmart realizes there's no reason to provide affordable healthcare to their part-time workers, they can go and get large subsidies."

Witness Douglas Holtz-Eakin, president of the American Action Forum predicts many companies will follow in Wal-Mart's footsteps under Obamacare. That would not be without significant fiscal consquences. Holtz-Eakin testified about the the impact this would have on the budget and, in turn, the national debt:

CBO [Congressional Budget Office] has also radically underestimated the number of individuals who will be purchasing insurance on the insurance exchanges with the help of tax-payer funded subsidies. The key driver of this will be a dramatic reduction in employer sponsored insurance… it would be cost-effective and rational behavior for a significant number of companies to stop offering coverage and push employees onto exchanges.

CBO estimated that only 19 million residents would receive subsidies, at a cost of about $450 billion over the first 10 years. This analysis suggests that the number could easily be triple that (19 plus an additional, say, 38 million in 2014) – meaning the price tag would be $1.4 trillion. 

Sara Collins, vice president for Affordable Health Insurance, maintained that the 2014 health care reforms "could not come soon enough." When asked by a member of the committee who will eat the costs for this program, Collins said, "There are several offsetting provisions that do pay for the expansion completely and, in fact, save money." 

Collins held that there is a predicted 124 billion reduction in the deficit thanks to the Affordable Care Act. When asked about alternative research concerning the costs of the program she said, "I have not seen anything that sheds doubt on the validity of the CBO report. If anything they're conservative [in their estimation of savings]."

Professor Richard Burkhauser from Cornell University had doubts about that optimism, "This is an effort by a bunch of economists in a room trying to figure out the way the world works, trying to provide affordable care to people who don't have coverage without affecting everyone else. That can't be done."