ACA - Treatment of Married vs. Unmarried Couples

[Purron]

I apologize in advance if this topic has already been covered. I searched and found nothing on it. If there is a thread or post addressing this issue, please direct me to it.

My question has to do with how two unmarried people are treated versus a married couple under the ACA. Using the Kaiser subsidy calculator (Subsidy Calculator | The Henry J. Kaiser Family Foundation), I came up with the following estimates:

1 person, age 58, $35,000 income, no children, non-smoker
Premium $7,690
Amount you pay $3,325
Subsidy $4,365

2 people, age 58, $70,000 income, no children, non-smokers
Premium $15,380
Amount you pay $15,380
Subsidy $0

Thus, it appears two single people living together who each make $35,000 would pay $3,325 each after the subsidy – or $6,650 for the couple. A married couple who each make $35,000 would pay $15,380 and receive no subsidy.

Am I understanding this correctly? If so, what’s to stop a couple from getting divorced and applying as individuals in order to receive two subsidies totaling $8,730?

 

[MichaelB]

Am I understanding this correctly? If so, what’s to stop a couple from getting divorced and applying as individuals in order to receive two subsidies totaling $8,730?

Seems to me you understand it quite well. There may be other legal factors that affect a couple's decision to remain married, such as taxes and pensions, but nothing in PPACA regs would stop them from doing what you described. Here's an older CRS report on premium credits that discusses premium credits for married vs unmarried couples. http://www.ncsl.org/documents/health/hlthinspremcredits.pdf

 

[Gatordoc50]

Honey, would you pay 25 dollars a day to be married to me?

 

[photoguy]

nothing in PPACA regs would stop them from doing what you described.

Perhaps one issue may be if the divorce is considered some kind of "sham transaction" for the sole purpose of obtaining the subsidy.

 

[jflynn4]

Unfortunately, It appears you have a clear understanding.

 

[zedd]

Did you plug into the calculator gross income?
Try it with MAGI instead

http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf

 

[Buck2520]

Well yes you are correct. Of course your example puts the couples MAGI at $70,000 which puts them above the income threshold, therefore, no subsidy. While your example for the single person puts their MAGI at $35,000, within the income level which qualifies for the subsidy. Seems pretty underhanded and unloving to divorce just to get the subsidy, especially when their income is so high and they should be able to afford the unsubsidized insurance. If two people live together and each makes $35,00 they are still individuals and have made no commitment to each other.

 

[foxfirev5]

While your example for the single person puts their MAGI at $35,000, within the income level which qualifies for the subsidy. Seems pretty underhanded and unloving to divorce just to get the subsidy, especially when their income is so high and they should be able to afford the unsubsidized insurance. If two people live together and each makes $35,00 they are still individuals and have made no commitment to each other.

I guess I don't understand how a married couple making a combined 70k is so much better off financially than two individuals each making 35k and living together. If we could combine two married couples then their income would be really high.

 

[Gatordoc50]

I don't think a couple making 70k is high. Paying over 20% of your income for health insurance is high.

 

[RockyMtn]

I don't think a couple making 70k is high. Paying over 20% of your income for health insurance is high.

+1

 

[Willers]

I don't think a couple making 70k is high. Paying over 20% of your income for health insurance is high.

+2

 

[pb4uski]

I don't think a couple making 70k is high. Paying over 20% of your income for health insurance is high.

I agree with you, but I wonder how realistic is it that a couple would pay more than 14k a year for health insurance.

I know ours will be ~9k a year for the both of us which would still be ~13% if our income was 70k. A silver plan would be ~10k a year in our area. While 13-14% is also ridiculous, it is a lot less than 20%.

I guess that some parts of the country may have much higher premiums than our area.

 

[MichaelB]

Median US household income is $52K, and the average cost of a family policy is $15.7K, so in 2012 the average cost of health insurance was 30% for the average household. Most people with insurance don't pay that because of employer subsidies.

 

[Fermion]

It is because they think two married people can live cheaper than two individuals because they share housing/transportation, etc.

This works well with health costs also. You can get joint MRI scans where the married couple both go in the machine at the same time. The cost saving is why they cut the subsidy out for married couples.

 

[travelover]

Legal assumptions about married couples vs couples living together are anachronistic. When I was working for Habitat for Humanity, I used to fume over the couples that qualified for a house based only on the woman's income, even though they were obviously a committed couple, often with kids.

 

[Gatordoc50]

This example doesn't represent the ACA as a whole. It mainly points again to the problem of the "cliff" and a problem with penalizing married couples. Hopefully those will be corrected. When we look at costs we understandably look at them from an individual standpoint. The true cost differential between now and the ACA wont be known until we tally total costs and the corresponding benefits. Personally, I think giving people with pre-existing conditions the chance to buy insurance at relatively the same cost as healthy people is the premier benefit of the ACA. Therefore I'm a supporter. I differ from most supporters in that I believe the costs to individuals will ultimately be higher.

 

[Gatordoc50]

Legal assumptions about married couples vs couples living together are anachronistic. When I was working for Habitat for Humanity, I used to fume over the couples that qualified for a house based only on the woman's income, even though they were obviously a committed couple, often with kids.

I saw this also with college scholarships based on need.

 

[Fermion]

I will point out that there are special cases where being married gives you the upper hand in benefits.

One big one is the spousal social security. A person who has never contributed a dime to SS can get half of their spouse's benefits (in addition to the money the spouse gets). This could be pretty big, up to $12,000 a year or more.

Two single people living together would not get this.

I haven't looked up how long you have to be married to obtain this benefit...if it is very short then the OP's strategy of getting divorced to save on ACA might still net you the spousal SS benefit too.

Nobody said life was fair...

 

[Purron]

Just want to clarify I have no intention of getting divorced to game the system. I became aware of this issue when discussing the ACA with my brother and his girlfriend who've lived together for many years. We played around with the calculator and noticed a big difference in what they'd qualify for vs. DH and I under various income scenarios.