Obamacare’s Marriage Penalty and Divorce Incentive
President Obama’s reelection campaign raised the hackles of conservatives last year when it released an interactive web graphic called the Life of Julia. The graphic depicted “Julia’s” cradle-to-grave reliance on government, and many viewers felt it offered a disturbing glimpse of the President’s ideology.
It was particularly striking that Julia seemed to lack any family or friends. At one point she “decides” to have a baby, but she never marries. And now perhaps we know why: under Obamacare, being married would likely have cost Julia thousands of dollars a year.
Many couples buying insurance through the Obamacare exchanges will face huge premium increases if they choose to get married, according to a tool created by the Kaiser Family Foundation. That’s because jointly they’ll lose substantial tax credits or subsidies they were eligible for individually.
The Kaiser calculator reveals that a married couple of 64-year-olds earning a combined $62,081 a year (each earning the same salary) would pay a premium of $15,211 for a “silver” plan under Obamacare. That amounts to more than a quarter of their income (and an even larger portion after taxes). If they chose not to marry (or to get divorced if they were already married), however, they’d pay only $5,360 combined for the same coverage. That’s a marriage penalty (or divorce incentive) of nearly $10,000 a year.
The story isn’t much better for a couple of 40-year-olds, one earning $70,000 a year and the other earning $23,000 a year. If married with two children, they would pay a premium of $9,700. If they chose not to marry (or to get divorced), however, they’d pay only $3,700 combined for the same coverage. That’s a marriage penalty (or divorce incentive) of $6,000 a year. By the time their children were 18, that would add up to well over $100,000 they could have saved to send them to college. (Tom Blumer at PJ Media highlighted similarly troubling scenarios before Kaiser adjusted its calculator.)
It was Robert Rector at the Heritage Foundation who first pointed out the “wedding tax” in Obamacare. That was back in January 2010 before the bill became law. Rector warned that “the bill’s anti-marriage penalties occur because of the income counting and benefit structure rules of the bill. If a two-earner couple is married, the bill counts their income jointly; since the joint income will be higher, a married couple’s health care subsidies would be lower.”
Nearly four years later as Americans log on to the exchange websites to sign up for Obamacare, many couples are discovering this unpleasant consequence for the first time. This week Al Jazeera talked to an Obamacare “navigator” in Colorado who said so far “no one” she’d talked to had signed up for coverage. “Thus far everybody has taken a look at the rates and they've walked out the door,” she said. “There's sticker shock. They just can't afford it.”
It’s a perverse law that would take such a sticker-shocked couple and tell them they could save $5,000, $7,000, even upward of $10,000 a year if they simply got divorced. At a time when nearly two in five children nationwide are born to parents who are not married to each other, this is no small problem.
This anti-marriage, pro-divorce provision needs to be changed before January 1. It should never go into effect.
The law creates a destructive incentive for the poor and their children, especially. As I relate in Chapter 10 of my new book Breakout, we know that children who grow up in single-parent households are far more likely to live in poverty. The poverty rate in 2010 for married couples with children was just 8.8 percent, compared to 40.7 percent for unmarried mothers. Children who grow up in single parent households are seven times more likely to become welfare recipients as adults, according to my friend Peter Ferrara at the Heartland Institute. So in some ways the Obamacare marriage penalty actually feeds the poverty problem.
We already have dozens of welfare programs that create terrible disincentives to marry. Obamacare’s marriage penalty makes this problem even worse, and extends it to many middle class Americans as well. Unfortunately, there are sure to be many more unpleasant surprises like this one ahead.