The Hidden Marriage Penalty in Obamacare

Childless couples and empty nesters pay more. Much more.

Figurines and displayed on a cake during the National Wedding Show at London's Olympia on February 22, 2013 in London, England. The National Wedding Show runs at London's Olympia until February 24 and features over 250 trade stands selling everything from wedding dresses, suits, cakes, shoes and flowers.
National Journal
Garance Franke-Ruta, The Atlantic
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Garance Franke-Ruta, The Atlantic
Nov. 5, 2013, 7:06 a.m.

The first time I heard Nona Wil­lis Aronow­itz talk about get­ting di­vorced to save money on health in­sur­ance I thought she couldn’t really be ser­i­ous. We were at Monte’s, an old Itali­an place in South Brook­lyn, hav­ing din­ner with a group of New York wo­men writers in late Ju­ly.

“Don’t do it!” I urged her, cer­tain, hav­ing watched my friends over the years, that no mat­ter how cas­u­ally she or her hus­band might treat the piece of pa­per that says they are mar­ried, get­ting un­hitched would in­ev­it­ably change their re­la­tion­ship as pro­foundly as get­ting hitched in the first place.

But with the ar­rival of the Af­ford­able Care Act’s in­sur­ance ex­changes, the ques­tion for Nona and her hus­band Aaron Cas­sara moved from the realm of cas­u­al con­ver­sa­tion to a real fin­an­cial conun­drum. Aged 29 and 32, re­spect­ively, they were fa­cing tough times for their pro­fes­sions, a wildly ex­pens­ive city, and the scary pro­spect that both of them could shortly be un­in­sured. Right now Nona only has a CO­BRA plan — “which I can barely af­ford” — that ends Janu­ary 1, she tells me. Her last staff job ended when the me­dia out­let she was work­ing for laid off its whole ed­it­or­i­al team; she’s been a full-time freel­an­cer since. Aaron, a film­maker who works part-time and also freel­ances, has been un­in­sured since her lay­off, be­cause it would be too ex­pens­ive to have him on CO­BRA too.

Any mar­ried couple that earns more than 400 per­cent of the fed­er­al poverty level of $62,040 for a fam­ily of two earns too much for sub­sidies un­der Obama­care. “If you’re over 400 per­cent of poverty, you’re nev­er eli­gible for premi­um” sup­port, ex­plains Gary Clax­ton, dir­ect­or of the Health Care Mar­ket­place Pro­ject at the Kais­er Fam­ily Found­a­tion.

But if that same couple lived to­geth­er un­mar­ried, they could earn up to $45,960 each — $91,920 total — and still be eli­gible for sub­sidies through the ex­changes in New York state, where in­sur­ance is com­par­at­ively ex­pens­ive and the state ex­change was set up in such a way as to not provide lower rates for young­er people. (Sub­sidy eli­gib­il­ity is cal­cu­lated us­ing a com­plic­ated for­mula in­volving in­come in re­la­tion to the poverty line, fam­ily size, and the price of plans offered through a state’s mar­ket­place.)

Nona and Aaron’s 2012 in­come was high­er than the 400 per­cent mark, but not by much. In New York City, that still doesn’t take you very far for two people. If their most re­cent months of in­come are in the same range, they will get no help at all with buy­ing in­sur­ance through the ex­changes if and when they ap­ply, ac­cord­ing to the Kais­er Fam­ily Found­a­tion and eHealth sub­sidy cal­cu­lat­ors. Premi­ums for the two for sil­ver-level plans came in at $9,248 for the year.

But if they ap­plied as un­mar­ried in­di­vidu­als with something like their 2012 in­come, one of them would get at least $3,964 in sub­sidies to­ward the pur­chase of a plan, or pos­sibly even be eli­gible for Medi­caid, thanks to their un­even in­di­vidu­al earn­ings that year. And if they fall be­low the 400 per­cent threshold, which Nona says they might this year, they could get sub­stan­tial sub­sidies as a couple that are still worth less than what they’d be eli­gible for as in­di­vidu­als. These gaps are the mar­riage pen­alty.

Mar­ried people who are un­in­sured make up just a small frac­tion of the un­in­sured, for ob­vi­ous reas­ons: It is easi­er to be in­sured if you have two po­ten­tial path­ways of get­ting there. Only 15.4 per­cent of mar­ried people were un­in­sured 2012, ac­cord­ing to re­search from the Kais­er Fam­ily Found­a­tion; the un­in­sur­ance rate for “single adults liv­ing to­geth­er” was more than twice as high — 33.4 per­cent.

That may be one reas­on the Obama­care sub­sides are more gen­er­ous to single people and one- or two-par­ent fam­il­ies with chil­dren in the house than to couples who lack chil­dren. They were de­signed to help single moms and strug­gling middle-class fam­il­ies with chil­dren, not mar­ried cre­at­ive-class mil­len­ni­als in pricey cit­ies who have not yet settled in­to well-paid work, or bar­ring that, work for a single em­ploy­er.

Health in­sur­ance isn’t the only place where there’s a mar­riage pen­alty. The fed­er­al in­come tax also hits mar­ried couples with sim­il­ar earn­ings harder than couples with one main bread­win­ner.

“In the tax code, you have a dif­fer­ent set of tax rates for mar­ried couples that mit­ig­ates the mar­riage pen­alty to some de­gree,” says Robert Rect­or, a seni­or re­search fel­low at the Her­it­age Found­a­tion who has been writ­ing about the mar­riage pen­alty in health re­form since 2010. Un­der Obama­care, however, there are “dra­mat­ic” pen­al­ties that are “sub­stan­tial — par­tic­u­larly with couples in the up­per age range,” he says.

“What you are do­ing is say­ing … you have to pay a pen­alty of mul­tiple hun­dreds of dol­lars — a sub­stan­tial por­tion of your in­come — to stay mar­ried,” Rect­or says. “It’s say­ing so­ci­ety is ba­sic­ally hos­tile to the in­sti­tu­tion of mar­riage.”

Ex­perts on the im­pact of mar­riage pen­al­ties were skep­tic­al that many couples would con­sider di­vorce over in­sur­ance rates. Still, there is some data to sug­gest that mar­riage pen­al­ties em­bed­ded in gov­ern­ment pro­grams can dis­cour­age mar­riage among those who are be­ne­fit­ing from pro­grams that fa­vor the un­mar­ried.

“The re­ceived wis­dom in pub­lic fin­ance is that mar­riage per se can be fin­an­cially dis­cour­aged if both mem­bers of a couple have de­cent earn­ings po­ten­tial and would face a high­er com­bined tax rate as a mar­ried couple than as a pair of singletons,” ex­plains Gary Burt­less, a seni­or fel­low at the Brook­ings In­sti­tu­tion. “At the lower end of the in­come scale, if the com­bined earn­ings po­ten­tial of the couple is not very prom­ising, mar­riage might pre­vent the mom and kids from re­ceiv­ing as much gov­ern­ment as­sist­ance as they can re­ceive if the adult couple re­mains un­mar­ried.”

There’s no data yet on the po­ten­tial size of the pop­u­la­tion po­ten­tially af­fected by such con­cerns un­der the Af­ford­able Care Act, but Medi­caid and oth­er means-tested pro­grams “already cre­ated that kind of po­ten­tial mar­riage pen­alty,” he notes. At least half of the newly in­sured un­der ACA will be in­sured un­der Medi­caid.

The great irony, Nona ex­plains, is “we wouldn’t be mar­ried if it wer­en’t for a situ­ation that happened in 2009 where he needed health in­sur­ance.”

Des­pite its ad­min­is­trat­ive be­gin­nings, their City Hall mar­riage has las­ted so far. Aaron was on Nona’s in­sur­ance at first; later, when their job ar­range­ments changed, she was on his. Now Nona is look­ing to land a full-time staff job, in hopes of once again hav­ing an em­ploy­er-based plan that Aaron, too, can join.

“I guar­an­tee you that in six months I will either be di­vorced or I will have a full-time job,” she says.

More from The At­lantic:

How Wash­ing­ton Is Wreck­ing the Fu­ture, in 2 Charts

The Squeaky-Wheel Prob­lem in Obama­care Cov­er­age

Clem­ency for Tor­tur­ers, but Not for Ed­ward Snowden

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