People earning the current minimum wage have significantly benefited from the expansion of “Obamacare”. A large number of those low income wage earners are single women with children. Because of the Affordable Care Acts’ expansion of Medicaid eligibility, these women have been able to get healthcare for themselves and their families.
The President is now pressing to increase the minimum wage; and, he is moving to expand eligibility for overtime. By expanding the minimum wage and increasing overtime payments, the President may actually be hurting those people who were formerly helped by the Affordable Care Act..
The unintended consequence of raising wages for people who have obtained health services through an exchange is that those very people may no longer be eligible for the subsidies or the benefits they received. If their wages increase too much, they may be put over the threshold for Medicaid eligibility and lose their benefits. If this wage increase goes into effect after the sign up deadline passes, those people will not be able to get health insurance coverage to replace their Medicaid coverage until 2015.
By expanding the minimum wage to $10.10 per hour, if a person works 40 hours per week, their annual income would be $21,008. Previously, at $7.25 per hour, the federal minimum wage, the same person working 40 hours per week would earn $15,080. Under the ACA’s expansion of Medicaid, any person earning $7.25 per hour and the family members they were financially responsible for would be eligible for Medicaid. By raising the wage to $10.10, a single person would no longer be eligible for Medicaid. If a single mother of one makes more than $21,707, she and her family is no longer eligible for Medicaid. (Note: In some states, like California, the Medicaid threshold was increased to 138% of the poverty level vs. the federal standard of 135%; but, in this care, the effect would be no different.)
Increasing wages for people who have already sought subsidized coverage based on current wages has another unintended consequence. If their actual income exceeds the estimated income their subsidies were based on, they will be responsible for repaying the difference between the lower subsidy they would get at their new higher wage and what they actually got. The IRS is responsible for enforcement. Failure to return the money can lead to garnishment of wages, attachment of bank accounts; the penalties are quite severe.
The registration deadline could be extended to accommodate those whose increased wages make them ineligible for Medicaid. However, moving people from Medicaid to an exchange policy significantly increases their cost of care. Not only do they have to pay for their coverage, but they are now responsible for co-pays, etc. Increasing income also impacts one’s eligibility for subsidies and out of pocket costs they will be responsible for.
Now that healthcare is directly tied to wages, we must be thoughtful about the interconnectedness.