The health reform law could undermine marriage because once people tie the knot, they may no longer be eligible for tax incentives for insurance. The law links the tax credit to household income, so two people whose combined income goes above a certain level will not be able to get a tax credit if they are married and file together. But if they get divorced or stay single they might, individually, be eligible for a premium credit. Giving people pause about marriage could be a big “unintended consequence” of the law.
Under the law, families as well as individuals can qualify for subsidies on a sliding scale, up to 400 percent of the poverty level. The proposed rule issued by the administration disqualifies a family from claiming the credit if either spouse is offered an insurance plan at work with an out-of-pocket premium less than 9.5 percent of household income for self-only coverage.
The proposed rule on tax credits is somewhat unclear on the issue of affordability for families with employer-sponsored insurance. It could be interpreted to mean that if only one spouse receives insurance through his or her employer, the family could be forced to choose between:
- a divorce and tax credits
- buying individual insurance without a premium subsidy, or
- paying a penalty and forgoing insurance.
Some experts believe HHS may issue further guidance about family affordability, but this would have consequences too: More people obtaining tax credits would drive up the overall cost of the law.
