Registered domestic partnerships are receiving a financial break under the Affordable Care Act not available to married couples. For married couples, if either one is offered employer sponsored health insurance that automatically excludes the spouse and children from receiving tax credits to lower monthly premiums on health plans purchased through the state health insurance exchange of the ACA*.
Registered Domestic Partnerships are not marriage
Because the federal government doesn’t recognize domestic partnerships as a filing status, individuals in those situations are eligible for premium assistance. Unlike married couples who must file a joint return in order to receive subsidies. Couples that file their federal taxes “Married Filing Separately” are also excluded from any premium assistance through the health market place exchanges like Covered California. In this case, the stubbornness of congress not to recognize domestic partnerships as equivalent to marriage has resulted in helping domestic partners afford health insurance.
Group health insurance can be expensive
I recently received a call from a client who was in a registered domestic partnership and whose partner had employer sponsored health insurance. Like most group health plans in California, my client was eligible to be covered under the partner plan as a domestic partner. My client had purchased an individual health plan because the group plan rate was outside of the household budget of affordability.
Individual plans as expensive as group plans
I incorrectly assumed that the availability of the employer sponsored health plan would disqualify my client from receiving any premium assistance. With her premiums set to double, there was a little bit of a panic about her options. Both the employee sponsored health plan rate and the individual health plan were roughly equivalent in price and too expensive for her.
Will we see a wave of divorce?
A little investigation with Covered California and the IRS reveals that domestic partnerships are not held to the same standards of denying premium assistance because of employee sponsored health insurance. This is another case where private industry is ahead of the federal government on the “social reality curve”. This quirk in the ACA law bestows a little relief for folks caught in the employer sponsored web of rules. Current rules penalize married couples and exclude the family from premium assistance under the ACA.
A percentage too far
*For all the sticklers for details: if the employee contribution exceeds 9.5% of the household income then the spouse and dependents can receive premium assistance through the exchange. I have yet to run into any family where the employee contribution exceeds 9.5%. If the employer contributes 100% of the employee’s health insurance premium, there is no way it can ever exceed the threshold. The net effect is that low and moderate wage families are being cut out of the affordable health insurance process.
An astute reader of this blog post noted that Covered California is requesting that Registered Domestic Partners include part of the partnerships income for determining eligibility for premium assistance in accordance with IRS guidance concerning federal taxes. From the Q&A on RDP from the IRS Question 9 –
Q9. How do registered domestic partners determine their gross income?
A9. Registered domestic partners must each report half the combined community income earned by the partners. In addition to half of the community income, a partner who has income that is not community income must report that separate income.
Unless I am interpreting this wrong, this would have the net effect of increasing the income of partner who is the lower wage earner in the partnership and thereby decrease the computed premium assistance. This seems like the lower wage earner is being penalized in light of the fact that the RDP can’t apply as a household because they don’t file “Married Filing Jointly” on their taxes. It looks like their is a regulatory conflict between recognized RDP, married couples and the applied premium assistance. Each RDP couple will have to wrestle with their income and how it is stated for the purposes of Covered California.