Sliding further down a slippery slope: Congress weakens ACA affordability protections again
Earlier today, Congress approved a bill that reduces paperwork requirements on small businesses by repealing what’s known as the enhanced 1099 reporting requirements passed as part of the Affordable Care Act (ACA.) Congress paid for this change by weakening the ACA’s health insurance affordability protections for low- and moderate-income families. While repeal of 1099 reporting requirements is an important priority for small businesses, the costs of this adjustment should not come directly from the pockets of struggling families.
How did Congress pay for 1099 repeal? Starting in 2014, the Affordable Care Act provides sliding-scale tax credits to help lower the costs of premiums for people earning up to 400 percent of the Federal Poverty Level (around $73,000 for a family of three.) The law allows the federal government to pay these tax credits directly to the insurer each month, so beneficiaries will only be billed for the amount of the premium they owe in excess of their tax credit. But if a person’s income changes during the year, they could potentially be eligible for an additional credit or owe an additional amount when they file their taxes. To strike a balance between recapturing subsidies and not hitting working families too hard, Congress placed caps in the ACA on how much low- and moderate-income families could be required to repay.
Earlier today, that balance was tipped against working families. Congress paid for the 1099 repeal by increasing the amount by $500, and sometimes more, that some low- and moderate-income families could have to repay at the end of the year if their annual income was higher than expected.
For example, a family may start the year off with a very low income and qualify for substantial premium tax credits each month. Midway through the year, one family member then gets a new job that raises the family’s income and offers health insurance, and they stop receiving monthly premium tax credits. However, at the end of the year that family will have to repay some of the tax credits they received when their income was lower, since their annual income turned out to be higher than their expected annual income when they qualified for the credits. The 1099 repeal bill passed by the Senate today increases the amount that many families in this situation will have to repay.
This provision is harmful to families and is politically dangerous because it:
- — Increases financial penalties on low- and moderate-income families for having found a better job or gotten a raise. These new costs will impose financial hardship on already-struggling families.
- — Reduces the number of people who will enroll in the advanced tax credits, since they will fear this type of unexpected cost. This means fewer people will get the coverage they need.
- — Jeopardizes public support for the ACA. Stories of families owing substantial unexpected costs could lead to further decline in public support for the law.
-Katherine Howitt, Policy Analyst