DOMA ruling puts PPACA tax credits at risk

By Kathryn Mayer

June 28, 2013

Although the Supreme Court's Defense of Marriage Act ruling was considered a win by same-sex couples, some couples could actually lose out when it comes to benefits under the Patient Protection and Affordable Care Act.

The court on Wednesday overturned DOMA, requiring the federal government to recognize gay marriages. That ruling changes how federal benefits work, and also means big changes for PPACA.

Brian Haile, senior vice president for health care policy at Jackson Hewitt Tax Service, said in an analysis this week that same-sex couples with similar incomes could lose their eligibility for PPACA tax credits.

That’s because same-sex couples can now file their taxes as a married couple, combining both partners’ salaries into a single household income. At least that’s the case for those couples who live in states that have recognized same-sex marriage.

“For example, same-sex partners who each have an income of $40,000 may be eligible for the premium assistance tax credits under the ACA — but only if they remain single,” Haile wrote. “If they marry (in those states that allow same-sex marriage), then they would lose eligibility because their income would be over the threshold for a household of two.”

The tax credits under PPACA will be determined on a sliding scale based on income. Anyone earning from 133 percent to 400 percent of the poverty line qualifies for a tax subsidy to purchase health insurance. Premium tax credits take effect in January 2014, following an open enrollment period that begins in October of this year.

Other same-sex couples, though, may gain if two partners have significantly different salaries or if only one partner works. The combination of the two salaries into a total income for a two-person household might be low enough to qualify for a tax credit even if one higher-earning partner would not qualify alone.

Same-sex couples also might lose their access to tax credits if only one partner has access to insurance through their employer.

PPACA limits the tax credits to spouses and dependents who don’t have access to coverage. Even if the employer doesn’t subsidize spouse or dependent health coverage, the fact that a spouse has access may disqualify him or her from the tax credit program, Haile explained.

“Same-sex partners should understand some of the implications of marriage to their health insurance options under the ACA before they tie the knot,” he said. “Simply put, getting hitched affects their health care.”

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