This is seared with us by Linda Gorman at John Goodman's Health Policy Blog:
On average, however, the family will be much worse off if the employer offers affordable coverage. To be affordable, the employee’s premium for his own coverage cannot exceed 9.5 percent of his W-2 wages, or $3,135. But the employer can charge any amount for other family members. Assuming the employee must pay the national average family premium ($4,316), the employee will have about $4,000 less take-home pay!
The table below follows Chief Justice Roberts in classifying required insurance premiums as a tax. The base case is a family of four earning $32,499, enrolled in Medicaid. Marginal taxes are calculated as the sum of additional taxes ($54 as federal income tax rises from $699 to $753) plus additional premiums divided by the additional income earned ($501).
Effect of Earning More: $32,499 → $33,000
Premium Payments
(Insurance “Taxes”)
Additional Federal Income Tax
Change in all “Taxes” Divided by Change in Income
Percent Change in Marginal Tax
Get subsidized family coverage in an exchange
$1,143
$54
$1,197/$501
238%
Buy family coverage from employer, average subsidy
$4,316
$54
$4,370/$501
872%
Go bare, pay 2016 penalty (2.5 percent of income)
$825
$54
$879/$501
175%
Go bare, ignore penalty
0
$54
$54/$501
11%
If the family manages to increase its earnings by $17,501 to $50,000, roughly the U.S. median income, it will still be better off if its employer does not offer coverage, as it would be able to purchase a subsidized family exchange policy for about $1,000 less than if its employer offered coverage at average subsidy rates.
But a family that goes “bare,” ignoring the penalty/tax, would enjoy an income increase of $16,588 net of federal taxes. It would be able to buy a lot of routine medical care for the $3,385 that Kaiser says it would have to pay for a subsidized exchange policy, and it would still be able to sign up for coverage when it wants other people to bear its medical costs.
