Does Obamacare Have an Affordability Glitch?

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As the title suggests, the text of the Affordable Care Acts states explicitly that medium-sized and large employers — or those companies that employ 50 or more workers — must offer “affordable” coverage to those working more than 30 hours per week or face fines. “Affordable” health insurance, as defined by the legislation, means that premiums can cost no more than 9.5 percent of an employee’s income.

But industry and policy experts are postulating that the healthcare reform championed by President Barack Obama will actually make health insurance unaffordable for many low-wage workers employed by restaurants, retail stores, hotels, and similar businesses. The problem is simple to understand; premiums the government defines as affordable may just not be so easy to fit into budgets for many of the uninsured Americans the law was designed to help.

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For low-wage workers — many of whom live paycheck to paycheck and earn barely enough to cover basic necessities — 9.5 percent represents a lot of money. Take, for example, a restaurant worker who makes $21,000 per year. A premium that costs 9.5 percent of their income would run $1,995 for the whole year, or $166.25 per month, and the insurance would be considered by the federal government as affordable. In addition to the cost of premiums, workers could also face an annual deductibles amounting to about $3,000 before insurance starts paying healthcare costs.

Even a premium of just $1,000 is rather pricey for someone stretching earnings in the low $20,000s, although that figure is close to the current average for employee-only coverage.

With such a small income, “there is just not any left over for health insurance,” Shannon Demaree, head of actuarial services for the Lockton Benefit Group, told The Washington Post. “What the government is requiring employers to do isn’t really something their low-paid employees want.” Lockton is an insurance broker and benefits consultant that caters to medium-sized businesses affected by Obamacare, and, as an actuary, Demaree specializes in cost estimates.

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Among worker advocates, the real debate is not over whether insurance will be too expensive, but rather, why it will be too expensive. Ron Pollack, president of Families USA, said the high ceiling for premium costs “is an imperfection in the new law.” He added that “the new law is a big step in the right direction, but it is not perfect, and it will require future improvements.” Others frame the so-called affordability provision in more negative terms. Andy Stern, the former president of the service Employees International Union, which is 2 million members strong, told the Post that the provision was “an avoidance opportunity” for big business. SEIU provided grassroots support during Obama’s campaign to push the bill through Congress.

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