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Berkeley Researcher Suggests Answer to Affordability Rule "Glitch" in Health Law

By Dena Bunis, CQ HealthBeat Managing Editor

December 13, 2011 -- Researchers at University of California, Berkeley, recently issued a report outlining how many family members of working Californians they say would not have access to affordable health insurance under proposed Treasury Department regulations. And the authors suggest an alternative they say would enable more people to get coverage.

Under the health care overhaul law (PL 111-148, PL 111-152), among those eligible for premium subsidies to help people buy insurance in the exchanges are those who are offered health insurance on the job but for whom that coverage is unaffordable. The definition of just what is "unaffordable" is what has led to this controversy.

Under Treasury's proposed rule, an employer's plan is unaffordable if the worker must pay more than 9.5 percent of his or her income. But that 9.5 percent only applies to an individual policy, not what it would cost an employee to insure family members.

According to a statement by First Focus, a children's advocacy group that organized a congressional briefing on this topic, while employee-only insurance premiums average about $5,000 a year, employee-and-family premiums are nearly triple that cost, averaging about $14,000.

Just using the population of California as an example, the Berkeley researchers found that if Treasury officials modified their rule to determine affordability based on the cost of family coverage, "an additional 144,000 Californians, more than half of them children, would get access to affordable coverage through the health insurance exchange.

"If California is representative of the United States as a whole, this translates into more than 1 million people who would be affected by the regulations," said Ken Jacobs of the UC Berkeley Center for Labor Research and Education.

Those who support the rule say adding dependents to the affordability calculation would dramatically change how much the subsidies would cost the federal government.

But the researchers said that if the rule were changed, their models show that there would not be a flood of new people eligible for subsidies.

"Less than 1 percent of people with employer-based coverage would move to subsidized coverage in the exchange as a result of having unaffordable coverage,'' said Gerald Kominski, incoming director of the UCLA Center for Health Policy Research. And, he said, many of those newly eligible for subsidies would be children so their health insurance costs would be lower.

"This new analysis highlights the importance of the administration getting the affordability measure right," said Rep. Pete Stark, D-Calif., said in a statement. "If they define it only in relationship to individual coverage, children and spouses fall through the cracks."

Treasury officials did not have an estimate on when the final rule would be issued. There was a two and a half hour hearing on the proposed regulation in November where groups spoke on both sides of this issue.

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