Under the Affordable Care Act (ACA), families are generally ineligible for Marketplace premium tax credits (PTCs) if a family member is offered worker-only coverage through an employer that is deemed affordable. The cost of covering the entire family, however, is not considered and may be unaffordable. Coverage is considered affordable if employee contributions for worker-only coverage do not exceed 9.83 percent of family income. In this brief, we investigate the impact of a proposed change that some legal experts believe the US Treasury Department and Internal Revenue Service could make through administrative action or that could be made through legislation: If family coverage is unaffordable, all family members except workers with affordable offers of single coverage would be eligible for Marketplace PTCs.
We find that if this change were made,
- 4.8 million people would be made eligible for premium tax credits (90 percent of them are already purchasing health coverage at more than 9.83 percent of their family income);
- not all of those gaining eligibility for PTCs would be better off switching, but 710,000 more people would enroll in Marketplace coverage with PTCs; in addition, just over 90,000 family members—mainly children—would newly enroll in Medicaid or the Children’s Health Insurance Program (CHIP) owing to their parents seeking Marketplace coverage;
- most new Marketplace, Medicaid, and CHIP enrollees would switch from employer-sponsored insurance (ESI), but there would be 190,000 fewer uninsured people;
- families switching from ESI would save about $400 per person in premiums on average, accounting for the tax advantage of ESI; families with incomes below 200 percent of the federal poverty level (FPL) would save $580 per person;
- health insurance premiums in the nongroup market would decline nationwide by about 1 percent, on average, because the new enrollees would generally be healthier than existing ones; and
- the change would cost the federal government $2.6 billion a year.