A Glitch In Time
“…An eligible employer-sponsored plan is affordable for a related individual if the portion of the annual premium the employee must pay for self-only coverage does not exceed the required contribution percentage…” (Federal Register, Feb 1, 2013. 78-22, p. 7265)
Once upon a time I was an enrollment assister in rural West Virginia, helping community members get signed up for ACA-compliant health insurance coverage. I have hundreds of success stories under my belt, and hopefully not as many failures. Most frequently, I can say with confidence, those failures could be attributed to the family glitch. Most Americans have never heard of the family glitch unless it has affected them personally. Actually, even if they’ve experienced this glitch, they may not understand what it is. It’s complicated, but important to understand when you’re parsing through all the new ACA-fix bills circulating out there. A family glitch fix is essential to allowing more people to access affordable health coverage.
I’ll start with an example:
Maria comes to me hoping to purchase a subsidized Marketplace plan for her husband who is a stay at home dad. She is working a full time job making $53,000/year. Maria has coverage through her employer for $175/month (about 4% of her income). However, to add her husband to her plan it would cost her $575/month (about 13% of her income) which she cannot afford. At $53,000/year for a family of 3, Maria’s husband should qualify for a healthy tax credit to help him pay for his coverage. So what’s the glitch? In this case, Maria’s husband is not eligible for a tax credit to help him pay. Here’s why:
An individual may not receive a tax credit to purchase Marketplace coverage if s/he has an offer of affordable employer-sponsored insurance coverage (ESI). “Affordable,” in 2019, according to the ACA/IRS, means the total cost of self-only premiums must equal no more than 9.86% of an individual’s total household income. “Self-only” is the key term. While Maria’s ESI cost for her family is well over 9.86% (at 13%), the cost of her self-only coverage is well under 9.86% (at 4%) and is thus deemed affordable. Therefore, her husband has an offer of “affordable” ESI and is not eligible for a tax credit.
How can this be? Turns out, it’s not a glitch. The IRS and the GAO have decided to interpret the law in such a way so as to cut costs. Fewer people eligible for tax credits means less money the government has to dole out. It all comes down to the interpretation of the phrase “required contribution.” Because the law states that the required contribution, as it relates to the individual mandate, will be calculated based on self-only cost, the IRS determined that “required contribution” as it relates to tax credit eligibility should also be calculated based on self-only cost, though the law does not explicitly state this.
Two to four million people are stuck in the glitch, with no options for affordable coverage. Back in 2014, Senator Al Franken first introduced the Family Coverage Act to fix the family glitch. His bill went nowhere because of concerns over- you guessed it- cost. But here we are in 2019, with a plethora of ACA-fix and health system reform ideas filling our inboxes and bungling our brains. Most notable, for the sake of this issue, is HR 1884: The Protecting Pre-Existing Conditions and Making Healthcare More Affordable Act, better known in health policy circles as ACA 2.0 thanks to the unsurpassable Charles Gaba. The upside is it passed the House in May, which is quite a feat given previous pushback. The down side is, well, Mitch McConnell will never let it come to a vote in the Senate. It is also worth it to check out Senator Sherrod Brown’s (D-OH) reintroduction of the Family Coverage Act, introduced in June, which specifically targets the family glitch. This bill would allow families to access Marketplace tax credits if the cost of employer-sponsored family coverage is greater than 9.86% of income, providing access to affordable coverage to millions of individuals.
So, what is there to do if you have found yourself in the family glitch? The hard answer is “not much.” Here are some true but maybe unhelpful answers:
What you should actually do:
The “family glitch” is essentially health policy jargon, so families may have experienced this without even realizing. They just know that the ACA hasn’t helped them, and they are owed an explanation.
Let’s educate, enlighten, and demand change for those who deserve access to affordable health insurance coverage.
ACA Consumer Advocacy
This blog contains thoughts and observations about health care and the ACA in the United States.