To ‘Fix’ the ObamaCare ‘Family Glitch,’ Biden Politicizes the IRS The new regulation is a clear violation of the law. By Brian Blase
President Obama visited the White House Tuesday to support his successor’s attempts to expand ObamaCare. The big news is that the Biden White House has succeeded in convincing the Internal Revenue Service to propose a rule that would illegally extend insurance subsidies to people who are ineligible for them.
Mr. Obama’s presence at the White House was ironic given that the IRS’s proposed policy reverses its decision from a decade ago, when he was president. At that time, the IRS believed it had to follow the law as written. The reversal shows that the enforcement of the tax code has become deeply politicized. Through this rule, if finalized, the IRS will expand ObamaCare subsidies by billions of dollars a year beyond what Congress authorized.
At issue is whether an employer’s offer to provide health insurance to an employee’s dependents disqualifies those dependents from ObamaCare subsidies. The 2010 law created large subsidies for plans in the new exchanges—so large that lawmakers worried the fiscal cost would be untenable. Mr. Obama insisted that ObamaCare cost less than $1 trillion in its first decade. To meet that demand, Congress limited subsidies to people without access to Medicaid or an affordable employer plan.
The trick was determining affordability. ObamaCare based affordability on the cost of coverage for the employee alone. Both he and his dependents offered coverage are ineligible for subsidies if his premium payment for self-only coverage exceeds 9.6% of income.
Some have called this a “family glitch,” since dependents may not have access to either subsidies or affordable employer coverage if the employer contributes little or nothing to their coverage. But that’s the law Congress passed in 2010. The provision was the result of the compromises necessary to enact it.
A decade ago, when the Obama administration was writing ObamaCare regulations, the IRS and Treasury Department spent enormous time on the issue. Many progressives pushed a broader interpretation, with affordability measured on the cost of family coverage. But the IRS and Treasury stuck to the law. IRS career staff are loath to revisit settled tax policy questions, and they likely came under enormous pressure from the White House to renounce their decade-old position and disregard the law.
The legal and constitutional concerns are paramount, but the change is also bad policy. The Kaiser Family Foundation estimates that about five million people are affected by the glitch. Nine in 10 of them are currently covered by a spouse’s or parent’s employer plan. An illegal administrative fix would mostly displace private spending with government spending as dependents replace employer coverage with subsidized exchange coverage. The White House projects only 200,000 fewer uninsured. It would also make coverage more complicated for families, who would be covered by separate plans with different deductibles and networks. All this would come at a cost of $45 billion over a decade, according to a 2020 Congressional Budget Office projection.
Congress can, of course, change tax policy and pass a law to fix the family glitch. That would make the costs more apparent. For now, Congress has a duty to get to the bottom of the IRS proposed illegal rule and take steps to check the overt politicization of the tax code.
Mr. Blase, who served as a special assistant to President Trump at the National Economic Council, is president of Paragon Health Institute.
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