Why the ACA’s Sliding Scale May Discourage Working

The Affordable Care Act (ACA) introduced a sliding scale of subsidies to help low- and moderate-income Americans afford health insurance. While this has been a major benefit for many, it has also raised concerns that it could discourage some people from working.

How the Subsidies Work

The ACA’s subsidies are based on a percentage of the federal poverty level (FPL). The lower your income, the higher the subsidy you will receive. For example, someone with an income of 100% of the FPL will receive a subsidy that covers 100% of their premiums. Someone with an income of 200% of the FPL will receive a subsidy that covers 50% of their premiums.

The Disincentive to Work

The problem with this sliding scale is that it can create a disincentive to work. This is because the more you earn, the lower your subsidy will be. As a result, some people may choose to work less in order to keep their income low enough to qualify for a higher subsidy.

What the Research Says

There is some evidence to support the idea that the ACA’s subsidies can discourage work. A study published in the journal Health Affairs found that the ACA led to a decrease in the number of hours worked by low-income adults. The study also found that the ACA led to an increase in the number of people who were not working at all.

What Can Be Done?

There are a number of things that can be done to address the disincentive to work that the ACA’s subsidies create. One option is to flatten the subsidy curve. This would mean that people would receive the same subsidy regardless of their income. Another option is to increase the income threshold for subsidies. This would mean that more people would qualify for subsidies, regardless of their income.

Conclusion

The ACA’s sliding scale of subsidies has been a major benefit for many low- and moderate-income Americans. However, it has also created a disincentive to work for some people. There are a number of things that can be done to address this issue, but it is important to remember that the ACA is a complex law that has a number of different effects. Any changes to the ACA should be made carefully so as not to undermine the benefits that it has provided to millions of Americans.