Decoding the Obamacare 'marriage penalty'

unmarried health care
Low- and moderate-income couples may find they can get a better deal on subsidized health insurance if they haven't gotten around to the "I dos."

There's a lot to recommend marriage. But if you're trying to score the biggest break on the new Obamacare insurance exchanges, it could make sense to say "I don't."

That's because unmarried couples may end up paying less for subsidized insurance than if they were married.

A primary reason are the federal poverty levels, which are used to determine the new subsidies to pay for premiums.

This "marriage penalty," as some conservative critics are calling it, is hardly unique to federal health reform.

"Any [federal benefit] structured based on poverty will have that effect," said Gary Claxton, a vice president of the Kaiser Family Foundation.

That includes Medicaid and various benefits administered through the tax code.

To qualify for one of Obamacare's premium tax credits -- as the main health insurance subsidy is known -- your income must be between poverty level and four times that amount for your household size. The higher up that scale you go, the smaller the subsidy.

The marriage penalty results largely from the fact that the combined salaries of couples can push them out of the range of eligibility faster than if they were unmarried and their paychecks were treated separately.

Here's why: The federal poverty level of a two-person household ($15,510) is less than double that of a one-person household ($11,490).

Take a couple who combined make $40,000 and don't have access to employer-sponsored insurance. Both partners are 35, each makes $20,000 and they don't have kids.

They will pay nearly $1,300 less for two silver-level plans in the exchanges after accounting for federal subsidies than if they were married, according to the Kaiser Family Foundation's health insurance subsidy calculator.

And that holds true whether they live in New York City, Las Vegas, Louisville, or Lawrence, Kansas.

Related: Some families left out in the cold by Obamacare

A brick and mortar store for Obamacare
A brick and mortar store for Obamacare

Couples, of course, don't usually make the exact same salaries. Say one partner in the couple making $40,000 brings in $29,000, and the other brings in $11,000.

As an unmarried couple they could pay much less for their coverage than if they take a walk down the aisle. The higher earner would pay close to $1,000 less for a silver plan and $625 less for a bronze plan. And the partner making $11,000 would qualify for Medicaid if they live in a state that has expanded eligibility for the program.

As a result, the partner on Medicaid would pay very little for that coverage since there's almost no cost-sharing of expenses involved, Claxton said.

But if they didn't live in a state with expanded Medicaid, the calculation is different.

Say that same unmarried $40,000 couple live in Kansas.

The $29,000 earner would pay $957 less for a silver plan than if she had applied for premium tax credits as part of a married couple.

But here's the rub: The $11,000 earner would not qualify for Medicaid or a subsidy on the exchange.

So, in that instance, if health coverage for both partners is important, they might be better off getting married and applying for subsidized coverage as a couple, even if it costs more.

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