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GAO Puts Pressure on IRS to Change Definition of Affordable Health Insurance

By Rebecca Adams, CQ HealthBeat Associate Editor

July 24, 2012 -- Many children may remain uninsured under a definition of affordable health insurance that the IRS used in a rule implementing the health care law, according to Government Accountability Office (GAO) report released Tuesday.

Under the law (PL 111-148, PL 111-152), in 2014, people will be eligible for tax credits, based on their income, to subsidize the cost of their health insurance in the new exchange markets. People will not be entitled to the credits if they are eligible for Medicaid, the Children’s Health Insurance Program or affordable health insurance.

But a big question has arisen about how affordable health insurance should be defined. Did the law’s authors mean health insurance covering an entire family, or just individual coverage for the parent or other family member who is employed?

In the IRS rule released in May, the agency decided to define affordable coverage as the insurance offered by an employer to a worker, not family coverage. The agency has finalized all of the parts of the rule except for the language defining how affordability should be measured.

The GAO report did not specify exactly how many more children would be eligible for subsidized insurance if the IRS switched from a standard that uses the cost of insurance just for a worker to one that considered the cost of a family plan.

But the GAO noted that “a key goal of PPACA [the health care law] was to increase Americans’ access to affordable health insurance.” The study urged the IRS to “consider the impact of the proposed standard” and “whether it would be consistent with the goals of PPACA to adopt an alternative approach that would consider the cost of insuring eligible family members.”

The study also found, “One implication of this proposal is that some families in which one member has an offer of self-only, employer-sponsored health insurance could be less likely to obtain family insurance than if no employer insurance were offered, because of their ineligibility for the premium tax credit.”

The report said that while the IRS has to “weigh many complex factors, such as costs to the federal government and effects on employers and families,” the agency also should think about the purpose of the law. “Under the proposed standard, an offer of affordable employer-sponsored health insurance to one family member could impede other family members’ access to affordable insurance—an outcome which would not further the broader goals of” the law.

Federal officials at the IRS and the Department of Health and Human Services did not comment on the findings, the report said. 

GAO Report on Children’s Insurance

Rebecca Adams can be reached at [email protected].

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