Biden Admin Pushes Unlawful Expansion of Obamacare Credits Through Rulemaking

The Biden Administration is pushing a proposal to unlawfully expand Obamacare subsidies through rulemaking.

By making policy changes without Congressional approval, this proposal represents another example of executive overreach. It would also create higher costs and complexity for families and would exacerbate debt and inflation. 

What is the White House proposing? 

In the beginning of April, the Biden Administration’s Internal Revenue Service (IRS) issued a notice of proposed rulemaking (NPRM) to expand Obamacare tax credits and fix the so-called “family glitch.”

Under Obamacare, employers are required to offer their employees “affordable” insurance, setting the threshold of affordability at 9.5 percent of the employee’s household income.

If a worker must pay more than 9.5 percent of their income, they are eligible to claim premium tax credits (PTCs) – an advanced refundable tax credit that subsidizes eligible recipients’ premium costs for their health insurance purchased through Obamacare’s insurance marketplaces. 

However, families are ineligible for the PTC if the individual’s coverage is below 9.5 percent, regardless of the cost of the family coverage. This provision, which was written into law by Democrats, is what some call the family glitch.

Now, the Biden Administration has proposed a new interpretation if the ACA’s employer insurance affordability test. This rule would create a separate affordability test for dependents. Family members of workers who are offered “unaffordable” family coverage would then qualify for premium tax credits to buy ACA coverage. 

The proposed rule would be an act of executive overreach. 

Calling this problem a “glitch” is dishonest and misleading because the Obama administration and Democrats wrote the bill and signed it into law. Since the bill was passed in 2010, congress has not changed the law.

Since then, the Obama IRS has determined that affordability by self-only coverage was the proper interpretation of the statute. In 2013 promulgated final regulations published in the Federal Register, the IRS explicitly states this interpretation of Section 36B of the Internal Revenue Code (IRC): 

“The language of section 36B, through a cross-reference to section 5000A(e)(1)(B), specifies that the affordability test for related individuals is based on the cost of self-only coverage.” – 78 Federal Register 7264, February 1, 2013 

Because the current interpretation is the statute’s original intent, attempting to change it through executive action is inappropriate and unlawful. Congress has decided against changing section 36B for 12 years. The legislature’s inaction, certainly, does not green light the Administration is legislate without Congress. 

In fact, Congressional Democrats included a similar proposal in their Build Back Better bill. Under BBB, the affordability threshold would have been lowered to 8.5 percent of income, rather than 9.5 percent. This was intended to expand coverage and, of course, largely resolve the family glitch. Democrats were unsuccessful in passing this law. Democrats also expanded ACA credits in the American Rescue Plan by increasing the PTC for those eligible and making those with incomes above 400 percent of the federal poverty line eligible for PTCs. These changes put enrollment at an all-time high.

The Biden Administration has the ultimate goal of expanding Obamacare. Evidently, because they couldn’t pass their full ACA agenda via the proper means, they are now attempting to do so through rulemaking.  

The proposed rule could create higher costs and complexity for families. 

In addition to being unlawful, the proposal could harm millions of families by increasing the cost of care.

Many employers already contribute to dependent coverage. In fact, according to the Kaiser Family Foundation, companies offering health benefits in 2021 paid 83 percent of the premium for self-only coverage and 72 percent of the premium for family coverage. 

Making dependents eligible for PTC’s would likely cause employers to reduce or eliminate their contributions, as the Galen Institute details in a comment letter: 

“The agencies themselves acknowledge that the proposed rule “would likely lead to a decrease in the total amount employers are spending on health insurance as the federal government increases spending on PTC.” That, ironically, would increase the cost of job-based dependent coverage, a demonstrable harm to millions of workers and their families.” 

Under the Biden Administration’s rule, millions of families would be subject to higher medical costs and unnecessary complexity.  

The proposed rule would exacerbate debt, making inflation worse. 

This rule would cost billions of taxpayer dollars at a time that the debt is at record levels. In 2020, the Congressional Budget Office (CBO) estimated that this proposal would cost $45 billion over 10 years.  

This level of spending is simply unsustainable and irresponsible. 

In 2020, the U.S. government spent over $6 trillion. In 2021, the U.S. spent $6.82 trillion, or 30 percent of the economy. The CBO projects that the U.S.’s interest costs will triple within the next decade: $331 billion this year to $910 billion in 2031, accounting for 12 percent of the entire federal budget. In 2021, the United States’ interest payments costed roughly $2,600 per household. The U.S. national debt recently hit $30 trillion — approximately $91,000 per taxpayer. 

The government’s massive spending problem has contributed to surging inflation in the United States. The federal government has flooded the economy with so much money that demand is growing too fast for production to keep up.  

The consumer price index increased by 8.3 percent on an annualized basis in April, according to the Bureau of Labor Statistics (BLS). Under the Biden economy, inflation has been surging for months. The erosion of purchasing power is especially concerning given that wages are decreasing as a result of high inflation. Real average hourly earnings have decreased by 2.6 percent over the past year.   

Inflation is now the leading public concern for Americans, with 59 percent saying they worry about it “a great deal.” Similarly, 58 percent of Americans are worried “a great deal” about the economy. Americans have an extremely pessimistic outlook on the economy, now tying with the most negative outlook since April 2020, the beginning of the pandemic.   

Not only is it dangerous to spend $45 billion during a time of such high inflation, but to do so with a simple stroke of a pen is especially egregious. 

The Biden Administration’s proposed rule is simply bad policy, as it could create higher costs and complexity for families as well as exacerbate debt and inflation. On top of being bad policy, the action would be unlawful. The executive branch has no authority to legislate simply because Congress has not been able to gather enough votes for the policy. The IRS and Treasury Department should withdraw the proposed rule.