Question about ACA premium credit eligibility

[Curmudgeon]

My wife is considering taking a part time job next year, doing something which she enjoys but does not pay well. The job offers health insurance. For just herself, the premium would be $600 per month, though she gets a $665/month 'allowance' for insurance, so it would basically cost her nothing. For our entire family, the premium would be $1865/mo, minus the allowance, so a net of $1200 per month. I expect our AGI for the year to be under $70K.

If I understand the rules regarding the ACA premium tax credit correctly, if my wife takes this job, we would no longer be eligible for the tax credit? I believe the rule states that no credit/subsidy is allowed if insurance is available to the family (it is), and if the plan is "affordable" - meaning the cost of the employee's contribution, for the employee's coverage only, is less than 9.69% of AGI (or MAGI? Let's assume they're the same).

By my definition, this insurance is not affordable - it would cost us $14,400 per year, or 21% of our income. Even the normal price for my wife alone would be greater than 9.69% of AGI. But because my wife gets an 'allowance', making her cost effectively $0, it becomes by definition 'affordable', regardless of what it will actually cost my family? This seems like a rigged way of determining affordability - the insurance would ALWAYS be considered 'affordable', regardless of how little our income is or how high the cost of the family policy. Am I interpreting the law correctly?

At this point, it looks as though my wife will turn down this job, because after losing the subsidy and paying for this insurance the net pay for the job goes down to almost nothing. Law of unintended consequences at play here?

 

[sengsational]

I can't answer your question, but I can tell you what I'd do to get another data point...

Open your tax software (yes, it's designed to work for 2016 tax year, but let's pretend all the rules stay the same). Go through the Q&A answering questions as if your wife's W2 income in there and that you have access to health insurance. See what it says on the 8962.

 

[pb4uski]

What the OP outlined in the OP sounds right... albeit a bizarre result. Best thing would be to call your exchange or healthcare.gov and see if they can confirm or refute the interpretation.

Perhaps OP's DW can take on the role as a consultant rather than as an employee and avoid the issue.

 

[ivinsfan]

Are you comparing apples to apples on this insurance. The work insurance might have a bigger network and lower co-pays?

Another way to look at is, it will guarantee your family insurance at a set price and you wouldn't be subjected to changes,(and some changes are definitely coming) in the ACA program..

 

[MBSC]

Am I interpreting the law correctly?

Yes, this is known as the ACA "Family Glitch". The article below includes a background section on how this came to be but I will avoid quoting that section.

The problem is that the definition of "affordable"--for both an individual employee and a family--is based only on the worker contribution of individual-only coverage and does not take into consideration the often significantly higher cost of a family plan.

Defining eligibility in this way ignores the cost of a family plan, which is frequently much more expensive than self-only coverage.

In 2013 the average worker contribution for self-only, employer-sponsored coverage was $999 annually, while the average contribution for family coverage was $4,565, although there is considerable variation in both single and family plans. Therefore, the employer-sponsored coverage would be considered affordable for a family of four with a household income of $33,000 (just over 140 percent of the federal poverty level), even though buying a plan for the entire family would cost 13.8 percent of their household income.

Full article: Health Policy Briefs

 

[brucethebroker]

What the OP outlined in the OP sounds right... albeit a bizarre result. Best thing would be to call your exchange or healthcare.gov and see if they can confirm or refute the interpretation.

Might be better to check with a CPA.