The Affordable Care Act (ACA or Obamacare) was signed into law for the purpose of making health care affordable for the people. But married couples across the country may find themselves burdened with higher premiums than their unmarried counterparts.
The built-in disparity in the law, dubbed as “marriage penalty”, was criticized as early as 2010 in a Wall Street Journal article. The penalty is not applicable to couples who have insurance provided by an employer and would only impact those who will buy insurance via the recently set up exchanges.
But more than three years after the landmark legislation was passed, many low-income as well as mid-income married couples are still unaware that they will be paying thousands more in premiums compared to couples who choose not to tie the knot.
But why the difference in the amount of premiums between married and unmarried couples?
The reason is that government subsidies used to pay for insurance premiums are largely based on poverty level guidelines set by the federal government. Note that under the ACA qualification for premium subsidies is granted only to individuals with income between poverty level and up to four times of it. The limit is $45,960 for singles while married couples can still qualify if their combined income is at $62,040.
When couples marry their salaries are combined, resulting to a larger income level, which may go beyond the coverage for subsidy, depending on the earnings of both spouses. Couples who choose to remain unmarried, however, are not required to file combined income. Rather, their earnings are assessed separately. The result is that unmarried couples each earning the max limit of $45,960 can still be eligible for premium subsidies without being penalized. On the other hand, married couples whose combined income is above the limit face the penalty of paying more premiums. The 2010 Wall Street Journal report estimates the penalty to amount to $2,000 or higher annually. The Heritage Foundation, in its report published in 2010, even estimates that couples that are married can even face penalties of up to $10,000 a year or more than $200,000 in their lifetime.
Declining to buy insurance is not an option, as the ACA requires mandatory insurance purchase. If you insist on not purchasing, you stand to suffer heavy fines. Would it resolve the problem if couples file married filing separately? No. There is this provision in the ACA that couples that resort to filing married separately will not be entitled to any subsidy at all. Apparently, married couples have no alternatives but to swallow ACA’s marriage penalty.