ACA’s “Family Glitch” Hurts Millions
Since the Affordable Care Act (ACA) was passed 5 years ago, more than 16 million people have gained health insurance as a direct result of the law. Gallup recently released a poll showing that the uninsured rate in the U.S. in the first half of 2015 was approximately 11.7 percent, the lowest rate since they started tracking the issue in 2008.
Even with these substantial gains, there are still many individuals who lack access to affordable care. One million Texans with incomes below the poverty level lack access to affordable coverage because state lawmakers have refused to accept new Medicaid funds to close the coverage gap. Another issue, known as the “family glitch,” is also keeping people with above-poverty incomes from accessing affordable health coverage, but has had less media coverage.
Under the ACA, a person who has access to “affordable” job-based coverage is not eligible for premium subsidies or reductions to cost sharing available through the Health Insurance Marketplace. Unfortunately, the generally high cost of covering one’s spouse or dependents is not considered when determining whether coverage is “affordable.” If a person has access to coverage through their spouse’s or parent’s employer, and the amount that the employee must pay for themselves only is less than 9.5 percent of their income, then the coverage for the child or spouse—regardless of actual cost—is considered “affordable.” This is the policy even if the family’s cost to buy coverage for the whole family actually consumes a much higher percentage of the family’s income. The mere offer of “affordable” job-based coverage excludes the rest of the family from subsidies. Let’s look at an example:
Edward and Alice are married and have two children. Edward gets health insurance at no cost through his job as a data processor. Alice works part-time for a catering company that does not offer insurance. To cover Alice on Edward’s plan it would cost more than $400 per month. Their household income is $37,000 per year or 155 percent of the federal poverty level. Even though it would cost more than 9.5 percent of the household income to include Alice in Edward’s plan, she is ineligible for subsidies through the Marketplace. Technically the insurance offered to Alice is considered “affordable” because Edward can get self-only coverage at no cost. The children are eligible for very low-cost coverage through the Children’s Health Insurance Program (CHIP).
This quirk in the law is preventing many people with modest incomes from accessing affordable coverage. These families are left with a choice of either paying a large percentage of their income towards health insurance, or going without coverage. So far, there is a lack of data that specifically measures how many individuals are affected by the family glitch, but there have been estimates ranging from 2 to 4 million and up to 10.5 million. Like the family in the example above, many children will have access to coverage through Medicaid or the Children’s Health Insurance Program (CHIP); however, estimates show that as many as a half million children in families just above the CHIP income limit may be affected by the family glitch.
As the last provisions of the ACA go into effect, the family glitch may affect more and more individuals. Under the Employer Shared Responsibility Provisions of the ACA, large employers (with 50 or more employees) are required to offer dependents health insurance; however, the ACA does not require that the employer cover any of the cost of the dependent’s coverage. For this purpose, a spouse is not considered a dependent, so employers are technically not required to offer insurance to the spouses of employees. However, in practice very few insurance plans offer coverage for the employee and the employee’s children but not for the spouse, so most employers would offer insurance to the spouse even though they don’t have to. But, just as with dependents, there is currently no minimum standard for the employer to contribute to a spouse’s premium.
It’s important to note that we have not yet seen the full effect of this provision because the IRS did not penalize employers at all in 2014, and is allowing “transition relief” in 2015 to employers who have not previously offered coverage to dependents. This allows them to not offer insurance to dependents in 2015 as long as they are taking steps to offering it in the future. As more employers offer health insurance to dependents in 2015 and 2016 (but don’t necessarily make it affordable) we may see the family glitch affecting more individuals.
Congressional action would be required to fix the glitch because it is caused by a lack of clear language in the federal law. Given the current political environment in Washington, especially with regard to the ACA, it seems this issue is not likely to be fixed anytime in the near future. This is an ongoing source of frustration for the affected uninsured families and for the organizations trying to help enroll uninsured Americans in coverage.