Unaffordable Affordability in Health Care Reform?

It was one of the president’s most repeated selling points for health care reform: “If you like your health plan, you can keep it.” A selling point that acknowledged more than anything the 150 million American employees, 58% of the entire workforce, who have access to employer-sponsored health insurance (ESI) for themselves and their families and aren’t sure they want to mess with it. This type of private coverage has become so much the foundation of the health care system, many reform drafters thought it too ingrained to significantly change. The law instead sought to protect and bolster ESI with tax credits for small businesses, a requirement for large businesses to provide coverage, and the widely reported “individual mandate” penalty for workers who dismiss such coverage when offered. The continuity of ESI through health care reform is precisely why a recent Affordable Care Act (ACA) regulation is raising so many eyebrows. The proposed rule could make the widely popular benefit of family ESI unaffordable for millions of Americans, especially working Latino families. This is why NCLR joined this week’s “Fix the Family Glitch Advocates Letter” to the president and Congressional leadership seeking a solution, along with over one hundred other advocacy organizations. As recent congressional briefings, studies, and news stories agree, ESI family coverage needs to come down, not continue to spiral out of reach.

The president’s slogan always was a strong nod of assurance for a nervous electorate accustomed to the predominant form of American health insurance. It wasn’t just spin; it was a reflection of the basic essence of the ACA. Health care reform was an attempt to patch and improve an existing system of public and private coverage, all delicately balanced and interlocked with ESI. These interdependent parts ensure that all who gain from reform also have a stake in the ACA—a shared responsibility under law. For large employers, this means contributing to the cost of subsidizing their employees’ purchase of health insurance in the Exchanges if those employees don’t have an offer of affordable ESI. For small employers, incentives in the form of tax credits are given if they provide ESI through an optional Exchange newly designed just for them. Employees have the individual responsibility to accept these affordable offers, and sign up.

Unfortunately, on the way to making sure employees have quality health insurance, either through their employer or through the Exchanges, a pitfall developed around what precisely qualifies as an “affordable” offer of ESI. As anyone who has looked at their workplace coverage options knows, family coverage is usually a lot pricier than just enrolling in the self-only plan. But the ACA didn’t clearly state which type of ESI plan must prove affordable. Considering the ACA bars an employee from the Exchange if offered an affordable ESI plan, this lack of clarity represents a significant potential Catch-22. Proposed regulations last year took exactly this feared approach and pegged the test of affordability to individual ESI, potentially saddling employees with family plans beyond their means.

So how does this play out for Latino workers and families? First and foremost, make no mistake: an unaffordable definition of affordability may be particularly difficult for Latinos due to their demographics and prospective gains from ESI. Hispanics are more likely than any other racial or ethnic group to pursue marriage and to have children in financially struggling families. Furthermore, the vast majority (84%) of uninsured Latinos live in families, a rate higher than their uninsured non-Hispanic White peers (69 %). Making ESI unaffordable for those Latinos who receive an offer of ESI—which they are required to accept—would be a peculiar and unintended side effect of a law that was supposed to make coverage affordable.

Through advocacy with the Obama administration, detailed explanations have already been relayed as to why a careful read of the ACA shows that the affordability test should be applied to family, not self-only coverage. However, a simple appeal to the overall intent of health care reform to bring everyone fully in to the system should be sufficient. Members of families unable to afford ESI dependent plans, but unable to access the Exchange for affordable options, might very well forego family health insurance altogether, despite subsequent tax penalties. Drafters of a law meant to lower the uninsurance rate while simultaneously protecting the current form of ESI could not have intended such a result.

Along with many allies seeking to maximize reform, NCLR has already submitted formal comments on this unaffordable affordability test and will continue to advocate for a fairer interpretation of the law that ensures access to affordable quality health insurance for all. The ACA went to great lengths to preserve the ESI system, even at the expense of competition between ESI and the Exchanges. But the deal for keeping the historical oddity that is ESI was that it would remain affordable. Otherwise, the effect may be to force people to keep health plans they don’t like. And that selling point definitely doesn’t have the same ring.

Jennifer Ng’andu and Sergio Eduardo Muñoz are the Deputy Director and Senior Policy Analyst of the Health Policy Project at the National Council of La Raza (NCLR). This blog was cross-posted on NCLR Blog.