Employers know that no matter what insurance solution they choose, they will need to abide by certain affordability benchmarks with their offering. And individuals who venture onto the exchanges to enroll in health insurance coverage, their eligibility for tax assistance is based on affordability rules, too. Since affordability seems to be the yardstick with which the health insurance industry measures compliance, it’s important to understand what those affordability definitions are. More importantly, there is a phenomenon the industry is calling the ACA family glitch that is proving to affect both sides of the affordability coin. Here are three things you need to know about the family glitch and how it might impact your affordability situation.
1. What the ACA Family Glitch Is
According to the guidelines of participation with the Affordable Care Act (ACA,) marketplaces offer a wide range of health insurance plans to those who qualify. Individuals who are eligible to enroll in plans via the exchanges can also apply for premium tax benefits to help lower the out-of-pocket costs associated with monthly premiums. But there’s a loophole affecting many Americans adversely; it’s called the family glitch.
General Definitions of Affordability
Securing financial assistance to enroll in ACA health insurance plans is usually reserved for those who don’t qualify for the public programs or don’t have coverage through a workplace. But there are other exceptions for those who do have employer-sponsored plans but just can’t afford them. The Marketplace subsidies become available to those workers whose employers expect more than 9.83% of their household incomes to enroll in the company-sponsored plan.
The Family Glitch
The affordability rule, allowing those workers whose employers charge more than 9.83% of the household income to participate in ACA plans with subsidies, has a flaw. That 9.83% only applies to self-only coverage. When an employee has a family to insure, those costs can exceed the threshold. But since the requirement of companies is self-coverage affordability, there becomes a growing number of individuals who can’t afford work-based coverage and don’t qualify for ACA plans subsidies either. This has come to be more commonly known as the family glitch.
How Many Are Being Affected
The Kaiser Family Foundation (KFF) suggested in a brief that nearly 5.1 million people fall into this family glitch scenario. And a majority of those affected are children. Other demographic data supports the idea that women are more susceptible to landing in this family glitch space than men. As a result, there are policies being introduced and discussed designed to address these impacted family glitch groups.
2. Federal Officials Are Addressing the Family Glitch Problem
The Obama administration became aware of the family glitch, with early interpretations of the ACA affordability rules. Of course, since then, we’ve changed occupants in the White House and a few ACA-related policies. Here are a few things policies might be improving.
The IRS Interpretations
Under the ACA-founding Obama administration, the definitions interpreted affordability excluding these dependent coverage scenarios. And many critics suggested the IRS view was too narrow, prompting conversations about provisions to address these family glitch consumers. And administrative actions have helped some affected by this nuance in policy, but more would need to be done.
The Congressional Budget Office (CBO) Response
Trying to eliminate the family glitch altogether might be too costly to pursue. In past discussions, the Congressional Budget Office (CBO,) responsible for compiling analysis and policy model projections, said it might take as long as ten years to try and reverse the family glitch effects. It would also likely cost nearly $45 billion to straighten the ship.
The American Rescue Plan (ARP)
The American Rescue Plan, authorized with an executive order by President Biden, calls for direct review and intervention of policies that affect the affordability of dependent coverage. To help more immediately and as a direct response to the pandemic, the plan authorizes a nationwide Special Enrollment Plan. In the short term, this allows those traditionally not eligible for subsidies to re-apply and potentially leverage those premium savings.
3. Which Americans are Affected by the Family Glitch?
Diving deeper into understanding just how many people are affected by the family glitch, it’s clear there’s more to unravel. And the consequences of the economic shutdowns and pandemic restrictions have impacts that most data models haven’t completely captured yet. Here’s what we know so far.
Three Groups Fall into the Family Glitch Trap
According to numbers collected by the Current Population Survey (CPS,) there are three groups of people primarily impacted by the family glitch. Based on 2019 surveys, the biggest group represents dependents with an employer-sponsored plan. Those with individual market coverage, along with those people without health insurance at all, represent the remaining two groups.
There Could Be More Families Affected
What those 2019 group numbers don’t represent are those eligible for Medicaid, Medicare, or CHIP benefits. Also unclear are the numbers of individuals experiencing family glitch scenarios because of the pandemic. The KFF estimates that nearly three million people lost company-sponsored health insurance between March and September of last year. And some may have transitioned to a spouse’s plan, while others went without health insurance entirely. Most scenarios, however, point to more people falling into this family glitch trap.
Most Are Enrolled in Employer-Sponsored Plans
A majority of the 5.1 million the KFF says are affected by the family glitch are those with “affordable” self-only plans through the workplace, with unaffordable premiums to cover their families. In fact, 4.4 million are believed to be in this rock and hard place spot. And in some studies, these people are spending an average of 15.8% of their incomes to pay for those costly, employer-sponsored family plans.
If you need help understanding affordability and eligibility requirements regarding the ACA Marketplace, contact W3ll! As a trusted Healthcare.gov partner, we can help you navigate available plans and subsidies, as well as keep you current with the latest policies.