by Blake Fussell
More than two years after it began, President Joe Biden declared the COVID-19 pandemic over on September 18. But the pandemic showed the importance of quality, affordable healthcare, which has been a struggle for more than 5 million Americans through an issue named the “family glitch”.
The Affordable Care Act (ACA) has judged employer-based insurance coverage for affordability and quality based on the premiums for individual workers, which has left dependents such as spouses and children in the family glitch, causing the worker’s family plan to become unaffordable despite its ACA judgment.
The Biden administration has proposed a fix to the family glitch though, through an IRS rule change to base a plan’s affordability on the family, rather than the individual. The rule change is yet to be finalized but is expected to take effect in 2023.
Until the rule change takes effect, workers have been left to find a solution for themselves. Some groups have taken initiative to assist those caught in the family glitch, including Health Agents for America (HAFA), which will host a virtual seminar next month.
What is the family glitch?
While the problems caused by the family glitch have been growingly apparent, its implementation was not an accident but an official rule within the ACA in 2013. The language used in two separate sections of the ACA allowed the family glitch to prevail, despite political pushback and evaluations by the IRS.
The ACA states that an individual’s employer-based healthcare must not exceed about 9.5 percent of their annual income. Since the ACA’s language specifically states that the percentage is based on the individual’s insurance costs, the family circumstances of the individual have not been considered.
When an individual’s employer-based insurance does not meet the minimum requirements for affordability and quality, the individual is eligible to receive a subsidy which they can use to find coverage in the marketplace. Basing affordability off of a family’s needs would have led many people to take advantage of the subsidies, which would have driven up federal costs significantly.
As a result, more than 5 million Americans, 2.6 million of which are children, have been affected, according to a study by The Commonwealth Fund. About 90 percent of the affected have some form of coverage, typically through employer plans that often cost the worker more than 9.5 percent of their income. Others have purchased individual coverage without subsidies and roughly 450,000 people are uninsured.
What population is heavily impacted by the family glitch?
The family glitch has affected dependents significantly and has been a major hurdle for low-income workers. Of the Americans affected, 46 percent earned 100-250 percent of the federal poverty level, 90 percent of which reported being in good health, according to a study by the Kaiser Family Foundation.
Another study by the Kaiser Family Foundation found that 12 percent of covered workers paid upwards of $10,000 to insure a family of four. Those who work at small businesses have felt the family glitch’s impact more frequently, with 29 percent spending more than $10,000 on healthcare for their family.
Healthcare costs have tripled since 2000 according to a study by the Urban Institute, which estimated the average affected worker has paid 16 percent of their annual income on coverage. Fortunately, a fix to the glitch has become more possible than ever through efforts of the Biden administration.
What could happen if the family glitch is fixed?
There have been multiple efforts to resolve the family glitch, but none have been closer to a reality than those of the current administration. Senator Al Franken’s Family Coverage Act of 2017 aimed to solve the issue and Hillary Clinton highlighted it in her 2016 electoral campaign.
If the rule change takes place as expected in 2023 the effect would be straightforward; when employer-based insurance plans are evaluated for affordability, they would take dependents and family plans into account. The White House estimated that fixing the family glitch would lead to 190,000 fewer uninsured Americans and would reduce premiums for 1 million Americans.
The fix could influence more Americans to steer away from employer-based coverage, increase tax credits and significantly increase access to subsidized marketplace coverage. Large employers would still have to offer affordable insurance, include dependents and increase their reporting standards.
Yet, the extent of the fix will depend on the amount of legislation passed. A study by the Rand Organization estimated the fix to cost the federal spending by $4 billion.
What are advocates for the fix saying?
President and CEO of HAFA, Ronnell Nolan, said fixing the family glitch could be a great thing for employees, even if it could create more work for employers. She explains that fixing the family glitch could change the entire process for employers but encouraged doing the right thing for families. HAFA is deeply involved in legislation at every level, helping move the needle within the industry and on Capitol Hill.
“We’re encouraging all of our agents and brokers to speak to their employers about this change in 2023,” Nolan said. “If they have employees between 100 and 250 percent of poverty, then we need to talk to them, get them enrolled in the marketplace and get them to a good place. This is a really good thing.”
Nolan advised that agents not in the individual market to partner with someone in the individual market. That way, someone can explain the family glitch to employers so the right choice can be made specific to employees’ families.
If the family glitch is fixed and low-wage employees are able to obtain subsidies for individual coverage plans, many households could see a dramatic drop in costs, in some cases close to free, according to Nolan.
To register for HAFA's virtual seminar on October 13 at 2 p.m. CST, click here.
We are grateful to have you as a part of our community, and we are thankful for your investment in helping us build our platform known as The Granite List, the most trusted source to search and compare benefits solutions.
