Sorry, gay marrieds: health insurers have to recognize your marriage

Equal protection under the law is a precious concept. For some gay married couples, however, recognition of their marriage by health insurers, newly required by HHS, may result in equal rejection under the law -- for Affordable Care Act subsidies.

Until March 14, insurers in states that do not recognize gay marriage could refuse to insure same-sex couples under the same policy.  This cost the victims nothing but disrespect, as there is no marriage discount in the nongroup insurance market.  Nonetheless, HHS has now clarified, an insurer is deemed to illegally discriminate if:

The issuer chooses not to offer, on the same terms and conditions as those offered to an opposite-sex spouse, coverage of a same-sex spouse based on a marriage that was validly entered into in a jurisdiction where the laws authorize the marriage of two individuals of the same sex, regardless of the jurisdiction in which the insurance policy is offered, sold, issued, renewed, in effect, or operated, or where the policyholder resides.

Married couples who apply for coverage through Healthcare.gov or the state exchanges have to file their taxes jointly if they want to qualify for ACA subsidies. The bad news is that the ACA's subsidy eligibility thresholds include a substantial marriage penalty. Individuals and households are eligible for subsidies if their income is less than 400% of the Federal Poverty Level (FPL) and an unsubsidized silver policy would cost them more than 9.5% of their income. 400% FPL in 2014 is $46,680 for a single adult and $62,920 for a two-person household. 

The subsidy cliff is steep for older buyers, because insurers can charge up to three times as much for a 64 year-old as for a 21 year-old, while subsidies ensure that two people earning the same income pay the same subsidy, regardless of age (with the federal government making up the difference). So take the case of a couple, one aged 55 and the other 60, each earning a taxable income of $31,500, living in Johnson County, Kansas.  If they're married, they'll pay $786 for the cheapest silver plan on the ACA exchange, with a $2,000 per-person deductible.  If not legally married,  the 55 year-old will pay $132 per month for the same plan, and the 60 year-old, $111 (I don't know why the 60 year-old pays less). 

In short, legally recognized marriage will cost them $543 per month.

The tax and other federal benefits attached to marriage are substantial. They include:

• Tuition and fees deduction
• Student loan interest deduction
• Tax-free exclusion of US bond interest
• Tax-free exclusion of Social Security Benefits
• Credit for the Elderly and Disabled
• Child and Dependent Care Credit
• Earned Income Credit
• Hope or Lifetime Learning Educational Credits

Still, for many, saving $6,000 per year in insurance premiums might outweigh those benefits, at least for a time.  I have queried the IRS as to whether legally married same-sex couples living in states that do not recognize gay marriage have to file their taxes as a married couple (either jointly or "married filing singly," which would disqualify them entirely from ACA subsidies).  That is, do gay couples have to recognize their own marriage if the state in which they live does not recognize it?  I will update when I  get an answer.

UPDATE: I have confirmed with HHS that before now, when insurers refused joint policies to married gay couples, they could apply separately on healthcare.gov, with solo income statements.

UPDATE 2 (3/20):  an important caveat arrives via Twitter: In states that have refused the ACA Medicaid expansion, those earning under 100% of the Federal Poverty Level,to  whom the ACA intended to offer Medicaid, are left high and dry. In that case, marrieds may actually qualify for ACA subsidies by pooling incomes to get over 100% FPL.