Hello Healthcare, Goodbye Marriage

WASHINGTON--Goodbye, marriage, one is tempted to say after studying the new health care law. Its terms, which determine federal aid with health premiums purchased through the new exchanges, will penalize married couples, even more than does the income tax now.

Beginning in 2013, when many of the provisions of the Patient Protection and Affordable Care Act take effect, unwed Americans may find it even more advantageous-financially, anyway-to stay single than to marry. And women, or possibly men who earn less than their wives, will face greater incentives to leave the workforce.

This is not because of the much-publicized Medicare surtax, affecting singles earning $200,000 and couples earning $250,000, although the new tax does intensify the marriage penalty at upper- income levels. Rather, another, potentially more serious problem will affect the low end of the income scale and reach up well into the middle class: the health insurance premium credits in the new law are linked to the poverty line, resulting in new and steep marriage penalties.

With $10,830 as the poverty line for one person and an additional $3,740 for a spouse, marriage in 2014 will mean less government help with health insurance premiums. Americans will receive credits for the purchase of health insurance for incomes up to 400% of the poverty line, now $43,320 for singles and $58,280 for a couple. Median household income was $50,303 in 2008, and 57% of all families, the majority, were at or below 400% of the poverty line.

Since premiums for new health plans in the new health exchanges won't come cheap-prohibitions for copayments for preventive services and lack of exclusions for pre-existing conditions will drive up prices-getting government help with the premiums will be vital to low- and moderate-income families. Workers on employer plans won't get help with premiums, so many employers are likely to terminate their increasingly-costly plans, pay the resulting $2,000 per worker fine, and leave workers to get premium credits and insurance from the exchanges.

In such circumstances, marriage means health insurance costs more.

Avoidance of marriage among low-wage earners would increase poverty rates. Data from the Census Bureau show that in 2008, the latest year available, 45% of families below the poverty line were headed by single mothers. In the African-American community, the rates were even more dramatic. Of all black families at or below the poverty line, 67% were headed by single mothers.

How will the system work? The new health care bill will offer premium credits to singles and families with incomes between 133% and 400% of the poverty line. These credits can be used only to buy health insurance through the new health exchanges. The size of the credits will be linked to the second-lowest cost plan in the area, and the credits are structured so that health insurance premium contributions are limited to percentages of income for specified income level.

Credits are awarded to limit the amount of health insurance premiums paid by the poor.  Premium limits range from a low of 2.5% of income for those at 133% of the poverty line to 9.5% of income for those at 400% of the poverty line. 

Since premium credits shrink as income rises, making premiums more costly, there will exist an incentive to report less income. That would discourage marriage between two employed persons, or would encourage nonmarital cohabitation and children.

Two singles would each be able to earn $43,000 and still receive help to purchase health insurance, but if they got married and combined their earnings to $86,000, they would be far above the limit. As a married couple, the most they could earn and still get government help would be $58,000, a difference of almost $30,000, or 32%. This looks like a substantial disincentive to getting married, or to working while married.

The penalty extends also to single mothers. Say Sally is a single mother earning $43,710, putting her and her baby at 300% of the poverty line. They would be eligible for the health insurance premium assistance credit.

But what if Sally wants to marry Sam, the father of her child, who earns $43,320, and is at 400% of the federal poverty line? Their total earnings, at $87,030, would exceed the 400% poverty line for a family of three ($73,240). Married, they would no longer receive help with their health insurance premiums, despite both earning the credit when unmarried. In order to keep her government health insurance benefit, Sally could only marry someone earning less than $30,000.

As well as discouraging marriage, the health care law gives an incentive to the lower-earning spouse, generally the woman, to leave the labor force, lowering the returns to her education and damaging her future job prospects.

A better way would be to give every American a credit to help with purchase of health insurance, as Wisconsin Republican Representative Paul Ryan has proposed in his Roadmap for America's Future. His proposed credit, $2,300 for individuals and $5,700 for families, regardless of income, would not discourage marriage.

Mr. Ryan's solution would deliver taxpayer money to upper-income people. However, it would be paid for by removing the tax-free status of employer-provided health insurance, a benefit that now provides a greater advantage to upper- than lower-income earners.

With 45% of poor households headed by single mothers, our laws should encourage rather than discourage marriage. The structure of health premium credits in the new bill will increase the number of fatherless families, leading to more poverty and a lower quality of life.