Everyone agrees it’s not fair to families and is an unintended consequence of how the Affordable Care Act is being implemented. But somehow our country’s leaders just cannot reach a consensus on fixing the family glitch. Families caught up in the glitch cannot qualify for premium tax credits to reduce the cost of a marketplace plan or for cost-sharing reductions to lower their out-of-pocket payments for health services, even if the family cannot afford coverage otherwise. Why? Because eligibility is not solely determined by income, it is also subject to whether a family has access to affordable employer-sponsored insurance. The problem is that the definition of ‘affordable’ – for both an individual employee and a family – is based only on the cost of individual self-only coverage, and does not take into consideration the often significantly higher cost of a family plan.
In 2014, if a family had access to employer-based coverage and the cost for just the parent/employee to enroll is than 9.5% of household income, then no one in the family would qualify for premium tax credits to purchase a marketplace plan. This measure is adjusted annually, and will increase to 9.56% of income. While these families may qualify for an affordability exemption from the tax penalty for going without insurance if the cost of coverage is greater than 8% of income, it means many will remain uninsured.
Low-income families are hit particularly hard by the family glitch. They not only earn less but also pay both a higher monthly premium and a higher share of the cost of employer insurance than higher wage earners. Thankfully, Medicaid and, more importantly, CHIP cover a large number of children in these families but spouses and some children will remain uninsured without a path to affordable insurance if the family glitch is not fixed. However, many more children could be affected if Congress does not act to extend funding for CHIP after the current appropriation ends in September 2015.
As its name clearly conveys, the law was intended to make coverage more affordable, and for millions of Americans it has. But the family glitch is a key trouble spot in how the law is being implemented and either Congress or the administration could fix the problem. Hard-working American families deserve this much from our nation’s leaders.
For more about the background on this problem and potential solutions, check out my new Health Affairs health policy brief.